The Truth About Taxes

Some of you may be familiar with the old adage, you only have to do two things in life, die and pay taxes. While some people might add working out and watching your gluten intake, paying taxes still remains very true. For property taxes to be paid correctly, it is crucial for servicers to set up loans correctly on their system during the boarding process. Not doing so could lead to penalties or even the loss of a property.

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The tax line is a record in a loan servicing system that includes all the data needed to identify when property taxes need to be paid, the amount of payment and what jurisdiction receives the payment.


The following charts represent the monthly number of items and dollar amounts for occurrences of paying the wrong amount of property taxes. The information is based on LERETA national data from prior servicer/lender acquisitions from July 2015 through April 2016.

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One important area to be cognizant of is the tax line, which includes all the data needed to identify when property taxes need to be paid, the amount and the jurisdiction to receive the payment. The line includes:


>> The tax payee code is the unique number assigned to identify the tax collection jurisdiction on the servicing system. This code cross-references to another file that includes the taxing jurisdiction name and mailing information.

>> The tax identification number is the actual number assigned to the property by the taxing jurisdiction and is required when obtaining any information from the taxing jurisdiction about the property.

>> The disbursement amount or last amount paid is the last amount paid to the taxing jurisdiction for this tax line (can be an annual or installment amount) and is updated with the current amount to be paid when new taxes become due.

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>> The due date is the date the servicer assigns to this line to alert them to an upcoming payment requirement (this date is based on business rules and is generally 15 to 30 days before taxes are due to the taxing jurisdiction).

>> The type is a code that identifies the type of taxes due, typically county property taxes, city taxes, school taxes and some non-standard payees, such as sewer taxes, garbage taxes, ground rents, etc. Servicers are required to report escrow payments annually to borrowers, and the tax type is used in preparing tax deductions on the borrower’s income tax return.

>> The term is used to identify the frequency the taxes are being paid, for example a Term of three indicates the annual taxes are being paid every three months, or quarterly (three months x four installments = 12 months).

>> Other codes as determined by the business rules of the servicer.

Servicers cannot rest on their laurels once the tax line is set up on a loan. It is extremely important that tax lines are monitored and maintained to ensure the accuracy of the data due and to any potential changes. Those changes could include new payees or the consolidation of taxing jurisdictions that no longer collects taxes, and how they are now collected by the county or separating taxing jurisdictions (a city decides to collect its own taxes instead of them being included by the county). There could also be changes in the due dates, contact information or tax identification numbers.

Servicers can either take on the responsibility of managing this process or work with a tax service vendor that can offer and facilitate the tax line setup and tax line audit services on behalf of the servicer. Either way, the taxes have to be paid correctly, else penalties will be incurred, which no one wants to happen.

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HMDA Costs: $40 Million Per Data Field

Recently the CFPB published its projected one-time costs to lenders for modifying systems and processes related to the new HMDA regulatory requirements. After getting through all the numbers and the accounting rules the bottom line is this: It will cost the industry $40 Million (yes million) for each new field included in the revised requirements. While I am not an accountant, David Moffat of Mortgage TrueView is. His analysis and summary of the expected costs as published by the CFPB resulted in this astronomical number.

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Mr. Moffat, as part of his analysis finds that the reoccurring HMDA costs under the new rules detailed the number of institutions by reporting profile, in other words by the largest lenders to the smallest. While the associated costs for the largest lenders (of which there are four) may appear reasonable, this cannot be said for any other company. Their approach to such things as labor costs, how the adoption costs are presented as a percentage of non-interest expenses and the division of these costs between all segments of the lender population has led him to determine that the CFPB has created their own Regulatory Accounting Principles. So instead of GAPP, we now have a new basis of accounting “CRAP”. If this material has not yet been reviewed by the CFO of your organization, it may be wise to let them review this published information.

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While the cost of new regulations has traditionally been of concern to lenders, this comprehensive analysis begs for the answer to two questions: (1) What are we getting for our money and (2) Why haven’t lenders been yelling “foul”?

Keeping in mind that HMDA has been around for forty years or so with very little improvement in the distribution of home mortgages to each race, ethnicity and/or gender, what will this new data get us. After all, one of the rationalizations for the mortgage spree in the mid 2000s was the development of mortgage products that would provide accessibility to affordable housing. That just didn’t work out so well. So what will all these new fields do? Will they isolate the societal causes of why some people are paid more than others, regardless of race, sex or ethnicity and allow us to cure a deeply embedded segregation against the lower class? Will they explain why realtors repeatedly lure sellers and buyers into properties that are over-priced and intimidate appraisers to “bring in the value” or put an end to this practice? Are we actually going to get information from this data that will allow lenders to do what HMDA legislation was intended to provide—data that will tell lenders where they have opportunities to expand? Maybe there is some other overwhelming benefit that is yet to be discovered, but we better be getting some benefit for the cost we are paying.

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But what if we’re not? Where are the lenders and/or the MBA, ABA, Credit Union and Community Bank Associations? Should they not be publicizing this outrageous cost and calling members to fight back. After all, lenders have nowhere to get the funds to pay these costs but from consumers and isn’t the CFPB supposed to be protecting consumers? Where is the hue and cry from consumer protection groups? Are all of these entities so in awe of the CFPB that they don’t even question the costs? Since the announcement about these new fields the only news coming from the industry has been technology companies laying out the needed changes to LOS systems and the related costs as well as seminars on “Implementing HMDA Changes”. Seems everyone is making money but lenders.

At the end of the day I am tired of lenders literally paying penance for over 10 years. Even though low interest rates have been maintained for a long period of time, those seem likely to end soon. If volumes drop and housing prices rise how can we continue to pay these outrageous costs? Will it take the destruction of the entire mortgage industry for legislatures, advocates and consumers to realize that we have paid our dues and stop this nonsense?

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Which Political Party Is Better For Homeownership?

Homeowners living in Democrat-controlled congressional districts have gained more than twice as much in housing wealth as homeowners living in Republican-controlled districts over the past eight years, according to an analysis by ATTOM Data Solutions.

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Among 2.4 million single family homes purchased eight years ago, those in Democrat-controlled districts have gained an average $59,467 in value since purchase — a 21 percent return — compared to a $22,086 return representing a 10 percent ROI for homes in Republican-controlled districts.

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But homeowners in Republican-controlled districts are paying lower property taxes — $2,514 on average representing a 1.02 effective tax rate compared to $3,659 representing a 1.07 percent tax rate for homeowners in Democrat-controlled districts.

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Counter to the national trend, seven of the 11 battleground states in the 2016 presidential election have produced better ROI for homeowners in Republican-controlled districts.

To come to these conclusions ATTOM Data Solutions looked at home values, appreciation, property taxes and equity for 2.4 million single family homes purchased eight years ago, broken down by congressional district. Those metrics were measured for all homes in congressional districts with a Democrat representative and for all homes in congressional districts with a Republican representative.


Reaching Out To Settlement Agents

We talk a lot about lenders having to reach out more to borrowers, but its not just borrowers that they have to reach. Ernst Publishing Company, a provider of technology and closing cost data for the real estate and home finance industries for the past 27 years, has enhanced its Settlement Agent Gateway to give lenders more control and flexibility with their local relationships with settlement agents. These local relationships are key to keeping new business flowing to the loan originator.

“One of the most significant risks our industry faced with the onset of the new TRID rules was disconnecting lenders from their local business networks out of fear of noncompliance because they can’t control fee quotes and fee changes,” said Gregory E. Teal, president and chief executive officer of Ernst Publishing. “We solved that problem with the Settlement Agent Gateway. This enhancement gives lenders complete control over these vitally important local relationships alerting them of fee changes in real-time while using effective dating to control loan quotes already in the pipeline; this helps eliminate any fear of noncompliance and mitigates cures.”

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Ernst’s Settlement Agent Gateway is a collaborative fee management system that allows settlement agents to work with lenders to negotiate fees and then manage these fees in a web-based tool through which they certify the accuracy of their fees and then make them available to lenders who need to provide Loan Estimates mandated under the new requirements. This ensures full TRID compliance, protects the lenders from cures resulting from quoting the wrong fees and protects smaller settlement agent firms from being pushed out of the market due to non-compliance concerns.

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The web based technology is simple to use and uses MISMO data standards to allow the settlement agent to enter pre-negotiated fees into a spreadsheet that includes cells for the required services by geography, and then certify that the fees are accurate with a single click. Agents can access the system at any time. Ernst then loads this fee information into the lender’s custom fee engine and when the company is ready to create a new TRID Loan Estimate, the certified accurate fees for their settlement agent partners will automatically be loaded into the disclosures.

The program lets the lender set up their panel of settlement agents in advance and then choose which agent to use on a loan-by-loan basis. This allows them to build stronger relationships in local markets by connecting local loan officers with local closing agents very early in the process. The new enhancement enables lenders to maintain consistency with pipeline loan quotes. The Gateway ensures TRID compliance by providing accurate closing costs in time for the CD.

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Ernst programs process an average of 150 million real estate transactions every year, industry-wide. Since the company was founded 27 years ago, Ernst has processed over 1 billion transactions. The firm estimates that its patented technology is in use for 90% of the nation’s new loan originations and refinance transactions.

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Are You Getting The Most Out Of Your Technology?

What’s the key to maximizing profit and efficiency? Many lenders might say using technology or getting rid of paper and embracing electronic mortgages. And to an extent they are correct. A well-tuned loan origination platform, combined with state of the art document engines, compliance software and settlement services automation can dramatically reduce the time and cost needed to close a loan.

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However, too many lenders pay significant dollars for their technology systems without taking the time to learn how to use them to their maximum effectiveness. This is a simple idea, but the sheer complexity of LOS platforms makes it difficult to achieve, especially when considering the myriad of integrations to third party vendors that are available today. Implementing an effective mortgage lending system requires that lenders have a level support that results in optimal technology adoption and the flexibility to take advantage of best of breed vendors that can meet their unique needs.

Teach Me How to Use It

The key to an optimized lending environment is getting the most performance out of the loan origination system as possible. Too often, lenders continue using old processes with new technology because no one has shown them a better way.

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When evaluating LOS vendors, lenders should look for two key things to ensure they are getting the most out of their investment. The first is the initial consultation and implementation provided by the vendor. A vendor that is dedicated to the lender’s success will take the time to understand the way a lender currently works and identify key areas where the new LOS can improve performance. This allows the vendor to align the needs of the lender with the capabilities of the software and uncover best practices that will introduce changes to existing processes that result in efficiency gains.

Secondly, vendors should be evaluated on their ability to provide ongoing training and support to continue getting the most out of the system. Training and support should be more than a reference guide or manual. It should address specific tasks and processes by laying out prescriptive recommendations on how best to automate workflow. The best vendors will be proactive about training and support, with the acknowledgement that system adoption is a never-ending process because new features are continuously added.

But an important element that cannot be overlooked is a robust service department that is committed to helping clients. Quality service is not just for troubleshooting, but to fine-tune system adoption. Having experienced, knowledgeable and responsive support fills in the detailed usability gaps that documentation and training cannot satisfy.

Build a Technology Framework that Supports Optimization

Optimizing the use of technology will help lenders improve their efficiency, but to truly maximize their investment, lenders should look for technology that adapts to the unique needs of each company. The LOS has evolved into an extensible system that is augmented with best of breed integrations to quality service providers.

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In today’s highly specialized world of mortgage lending, flexibility reigns supreme and lenders demand tools that best fit their particular business needs. The right document engine, automated compliance module, settlement services, web portal and other key pieces of the loan process will vary greatly between lenders based on volume, loan products, business model and geography.

To this end, when lenders are evaluating their LOS provider, the first question they need to ask is, “does this system integrate with the services that I want, or am I being forced to use certain vendors regardless of their fit for my needs?”

Innovative lenders will look for LOS providers that foster a best of breed technology environment that is open and accessible, willing to work with the third-party providers to build strong integrations that help the lender truly optimize each piece of the loan process. LOS providers that promote an open API model for integrations provide a simple environment for third party partnerships, resulting in quicker integrations and the ability to fine-tune functionality to be as effective as possible.

In a tech-driven world, the mortgage lenders who will be the most profitable are the ones who can most effectively reduce the time and cost of closing each individual loan. By taking the time to select the right partners, and then learning how to use those systems to the utmost capacity, lenders can position themselves to grow their business and better serve their customer base.

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Leading LOs Demand Marketing Automation

The right marketing automation solution automates engagement with prospective clients, provides relevant updates for in process milestones while developing and enhancing partner relationships. The right marketing automation solution employs leading technology to maximize marketing relevance and automation of communication that capitalizes on opportunities to increase pipelines and profitability.

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Mortgage specific marketing automation:

>> Increase pipelines and commission potential

>> Maximize market opportunities

>> Experience a surge in response rates

>> Develop loyalty throughout customer base

>> Gain a clear competitive advantage

>> Automate communications with prospective borrowers and clients

>> Develop and enhance partner relationships

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Going a step further the right marketing automation will unleashes your marketing genius to instantly create custom marketing that best fits you. There is no longer down time when wanting a custom marketing piece that features a product, service, event or partner. All the power is in your hands.

Top Features

Marketing Library

A mortgage specific marketing library provides Loan Officers with a full library of marketing content including materials designed by your corporate marketing team.


Here you’ll find hundreds of ready-to-go marketing materials that have been professionally prepared. Choose from postcards, letters, greeting cards, newsletters, emails, and much more. The materials are categorized by format, purpose and audience for easy access to exactly what you need. Content is constantly refreshed to target current business opportunities. In addition there are holiday greetings, home maintenance tips, recipe cards … something for every occasion.

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Your Corporate Collateral

Marketing automation provides access to your entire corporate marketing content including sales collateral. In addition, your marketing team is able to quickly and easily create custom content within the marketing automation solution to address opportunities for communications.

On-Demand Campaigns

Custom Campaigns can be run quickly and easily on demand to any mix of contact databases: prospects, applicants, borrowers and partners.


You’ll want to run a campaign whenever you spot a tactical sales opportunity – for example: a change in interest rates or other market conditions. On-demand campaigns are also an effective way of just staying in touch with your database – for example: making announcements about significant changes at your company.

Fulfillment is handled quickly and securely at an integrated state-of-the-art Production Center, whether you choose conventional mail or e-mail as your delivery medium. Campaign output is always fully personalized to each participating loan officer as well as the recipient – and you can rest assured it meets all regulatory compliance requirements.

CRM Module

Marketing automation incorporates a CRM module providing loan officer with simple tools to facilitate timely personal follow-up and to manage their day-to-day priorities.

Automated Retention Programs

The right marketing automation solution offers a wide variety of gifts and specially designed marketing materials for mortgage professionals. You’re free to combine these into automated programs that best suit your style and budget. After that, it’s hands-free all the way since the rules-based system does the work of production and fulfillment for you.

Communications are available in English and Spanish and can, if you wish; include your Realtor or builder photo and contact details.

The cost of retaining a customer – and building their lasting loyalty – is far less than the cost of acquiring a brand new customer. In fact, recruiting a new customer can cost between six and eight times the cost of generating high-quality referrals and repeat sales from an existing customer. The solution’s automated retention programs concentrate on activities that convert customer satisfaction into long-term loyalty and increased business. Programs with your own personal touch can easily be created from the following range of marketing materials professionally crafted to maximize customer loyalty, repeat business and referrals.

If your looking to retain top LO talent, you need to provide the tools they need to be successful. The right marketing automation solution delivers on that promise.

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Don’t Forget To Manage Operational Risk

A major issue in the financial industry is due to institutions maintaining a narrow scope on operational risk management programs resulting in miscommunication and gaps in the process. In the past, the biggest focus of operational risk management was on business continuity, which became a job task for one particular employee. As the market place evolved, vendor management regulations became more prevalent and another person was designated into the responsibility of maintaining the vendors.

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More recently, incident response regulations due to an escalation of cyber security threats increased resulting in another person taking on the task of maintaining incident response. Instead of consolidating all operational risk management tasks and looking at it as a bigger picture, the different areas of risk were delegated amongst a large span of people. Because of this, people don’t communicate and products don’t communicate with each other. As a result, these individuals rarely maintain a large focus on these operational risk management tasks and when they do they only focus on a small aspect of the larger picture.

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Another issue in the financial industry is that operational risk management is often over looked if the institution isn’t under an auditor’s microscope. Their approach to operational risk management is reactive and defensive rather than proactive and going on the offensive to auditors and regulations. They look for systems after it is too late and they don’t have the resources to devote someone entirely to managing all areas of risk. They often panic and purchase one system covering a small part of the bigger problem. They devote the time and money into the system and then never use it to its full capabilities. The minimal amount of information input is just good enough to get that check mark from the auditor but will leave them scrambling when an actual event occurs due to an inefficient process.

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RemoteComply is the solution for these industry frustrations. Our suite allows the financial industry to easily manage all areas of operational risk management under one platform. Instead of spreading the job tasks across departments, the suite allows complete communication throughout the risk management process. The suite will put institutions ahead of the game due to best practices and complete compliance built into the system. RemoteComply is cost effective and will eliminate the need to delegate different job tasks based on each area of operational risk management. These functionalities save valuable time and resources.

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Reputation Matters

Your reputation matters in the mortgage industry. If you want to be successful in business you have to have good character. In an article entitled “Character” by Jon Gordon, he said that if you asked 100 people how important character is to build a great team I bet at least 95 would say it’s essential. After all, you can be the greatest leader or coach on the planet but if your team lacks character you will fail to reach your potential.

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Yet, so often leaders and coaches attempt to build a team and organization by focusing on talent instead of character and this leads to challenging situations. We see it all the time in business and sports. A talented individual with character flaws makes a bad decision that affects the entire team and organization.

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That’s why when building a team you want to build it with both talent and character. Don’t just settle for talent. Talent without character is like a race car with no steering wheel. It looks great from the outside and drives fast but without something guiding it, a crash is very likely.

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Talent isn’t enough. Talent doesn’t last. It will only take you so far. Talent without character is also like an expensive car with no gas. It’s useless without the fuel that drives it. Character drives talent toward greatness. If you have a person who is humble, hungry, hard working, honest, dedicated, selfless, loyal, passionate, and accountable they will be the kind of person who develops their talent and makes the right decisions to benefit themselves and the team. Character guides and drives your team members to be their best and bring out the best in others.

The best leaders and organizations recruit high character people and continue to develop the character of their team members. They know that character education doesn’t end with character initiatives in elementary school. When you watch the news you realize that character education and reminders are something we can all use. We can all continue to work on becoming the best version of ourselves.

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A New Product With A New Twist

Move over traditional pricing engine. LoanScorecard has launched Pricer1, a personalized product and pricing engine for portfolio lenders and originators that can be accessed via web browser or mobile app.

Pricer1 allows portfolio lenders to instantly distribute their own rates and fees, as well as other investor pricing, to referral partners, third-party originators and builders via a custom-branded website and mobile app. Both the lender, and the originator can add their branding to the app and website, personalizing the presentation for their respective originators and customers.

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Originators using Pricer1 can access a personalized dashboard of live rates. They can search based on borrower profile, product type, best execution, rate, margin, etc. to provide eligible products and pricing options to potential borrowers in the office or on the go. In addition, users can create and save pre-configured, “typical” scenarios and borrower contact information to save time.

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The Pricer1 app allows users to track and preserve every rate quote and lock request, as well as send lock requests directly from their mobile devices.

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Pricer1 operates within Calyx Point and PathSoftware, and is also accessible via any web browser. It is currently available for download in the Google Play Store for Android devices and will soon be available in the Apple App Store for iOS devices.

“Millennials now make up the largest population segment and are just beginning to make their mark on the housing market,” said Ben Wu, executive director at LoanScorecard. “They expect fast answers that they can receive digitally whether they’re at a lender’s officer or an open house. Pricer1 enables originators to stay hi-tech and hi-touch—providing Millennials with live rates in seconds, but presented in a way that supports a lender’s brand.”

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