Lenders Speak Out

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The mortgage industry is changing. Purchases increased to 65 percent of all closed loans in June, up from 62 percent in May according to the latest Origination Insight Report released by Ellie Mae. This is the highest closed loan purchase percentage since August of 2014. Refinances represented 34 percent of closed loans in June, down from 37 percent in May. Additionally, the 30-year note rate dropped to 4.04 from 4.06 in May, the lowest point in over a year.

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The average time to close all loans increased to 46 days in June, up from 45 days in May. The time to close a purchase rose to 46 days in June, up from 45 days in May, and the time to close a refinance rose to 47 days in June, up from 44 days in May. Similarly, the average time to close FHA loans rose to 47 days in June, up from 45 days in May. Time to close VA loans increased to 50 days in June, up from 49 days in May.

To reflect on the changes going on in mortgage lending we assembled a panel of well-respecting lenders. (Left to right) Daniel Jacobs, the EVP and managing director of national retail lending for MiMutual Mortgage, Joe Detmer, branch manager for Churchill Mortgage Corp.’s San Diego branch, and Jeff McGuiness, chief sales officer for Embrace Home Loans, shared their views on the state of mortgage lending.

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Q: How has mortgage lending changed since you first entered the space?

JOE DETMER: I entered the space in 1994. One thing that has changed dramatically is the rates. It is more affordable to buy vs. renting. People are finding safe haven in real estate. Guidelines have also changed that makes it tougher to get a loan and home prices haven’t gone up much, but housing is very affordable. I also think TRID was a good thing because it pushed out the people that were just in the industry to make money vs. those that are interested in taking care of their clients.

JEFF MCGUINESS: First, the most obvious change is that consumers are more educated. There is more accessibility to education around product types and what the implications are.

DANIEL JACOBS: When I got into the business it was very structured and dominated by sophisticated mortgage bankers and then it went wild. Now I think it has returned to the mid 90s. I feel like I’m back in the beginning of my career whereby everyone is older and more educated.

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Q: In your opinion, what does a lenders have to do in order to be successful these days?

JOE DETMER: You have to be competitive with rates and products, but there are so many new things available to borrowers. We have to offer world-class customer service. During your lifetime you are likely to have six mortgages, so you want to be their lifelong advisor. You have to have the heart of a teacher because most people don’t know what we know.

JEFF MCGUINESS: It comes down to one word: efficiency. Regulatory compliance is very complex and those that can absorb that efficiently into their process will win the day. We are all selling the same products so you have to be more efficient overall in how you get those products to market.

DANIEL JACOBS: If we go back to talking about how consumers are more educated, everyone is more sensitive to the experience. To be successful you have to focus on the feeling about the experience among both your borrowers and employees. You have to be focused on the end user experience.

Q: How can lenders do a better job reaching out to Millennials and new borrowers?

JOE DETMER: You have to understand their preference of communication. Kids are growing up in a digital world and you have to be respectful. I’m 54 years old so that was hard for me to adapt to at first. I thought that I had to talk to everyone, but they are okay getting texts. Also, there is so much information out there so you have to distinguish yourself.

DANIEL JACOBS: We talk about that every month in our marketing meetings. The habits of the Millennials are different as compared to our traditional borrowers and they always change. You need to use social media and alternate forms of communication. I think my kids communicate one way only to find that method is now out of style and they’ve moved on to another form of communication. These days we have to provide various options for communication.

JEFF MCGUINESS: You also have to address the complexion of our sales force to make sure that they are serving the borrower. We have an aging employee base. So, you have to have people at the front of the process to relate to new borrowers. Our employees don’t necessarily have to be young, but they do have to know how to reach out and engage younger people.

Q: What’s your take on TRID 2.0 and the overall regulatory burden?

JOE DETMER: I love it. For a long time we created the perfect loan process. TRID has created a flight plan for the clients to know what’s going to happen next if it is communicated correctly by the loan officer. TRID has clarified the process. Second, it got the fraud out of the industry. I don’t see the fraudulent actors anymore. The rules have made lending a more professional industry.

JEFF MCGUINESS: The way we choose to handle compliance is to participate in the industry through the MBA and other outlets so we understand what’s going to happen and how we will be impacted. We don’t argue the point, we spend our time getting ready. You can’t wait until the eleventh hour. The other key is understanding the impact on your people. We have very standard roles in our industry and we have to analyze how these new regulations impact their job. These regulations as administered can be burdensome on our people and we’re concerned about potential burnout. We want to be sensitive to the overall process changes around compliance and how our people are impacted.

DANIEL JACOBS: That’s right. We want to be different without being the pioneer that changes roles completely so everyone feels satisfied in their roles. There are timing differences that arise around when something has to be done and checked. So, what does that mean to our employees? This is a question that we’re always asking because we have to have that balance. A lot of what used to done pre-closing is now getting done at the front of the process, which is changing traditional roles.

Q: What new technologies should every lender be embracing?

JOE DETMER: If lenders are not using Mortgage Coach, I think they are missing the boat. The technology has been around, but it gives the borrower the total cost of the mortgage. It allows you to generate a full wealth presentation. I use it with all of our borrowers. I can give every borrower a total cost analysis of the loan now and over the next few years. Also, you need an active database technology to make it easy for you to keep in touch with your clients. There are only so many clients out there, so you want to keep them so they keep coming back to you. These are not new technologies, but not enough lenders use these tools.

DANIEL JACOBS: Lenders need to spend some time deciding how they are going to monitor and control the use of social media by their employees. That is the biggest compliance risk because there isn’t much oversight and regulators are going to start looking closely at this. So, what is the balance between employee privacy and compliance? Every mortgage company needs to focus on this area. Ignoring social media is a dangerous strategy.

JEFF MCGUINESS: Our LOS systems are challenged to do much more as compared to what they’ve ever done prior. We expect so much of them. It used to be that you could use a subpar LOS and work around it, but you can’t do that anymore. The reliance on the LOS is becoming greater and greater.

Q: Looking to the future, how do you think lending will change over the next few years?

JOE DETMER: You will see a consolidation among smaller mortgage banks. The consolidation won’t be of companies, but rather of mindset. People that don’t wrap their minds around the fact that we’re here to serve the clients will be pushed out. You have to truly serve the homebuying and home owning public.

JEFF MCGUINESS: We have been operating at artificially low rates for some time and that will change. There is also a lot of demand for homeownership. So, how do we meet that need without low interest rate? Are we going to see ARMs come back as a result? Coming off an over-dependence on the agencies, I think we’ll see more private capitol coming back into our space over the next few years.

DANIEL JACOBS: In the short term the mortgage industry will be boring and steady, especially as compared to the Presidential Election. But in the future mortgage lenders will have to learn how to compete with each other just like restaurants do. The wave of the future is how to capture market share.

Insider Profile

Daniel Jacobs is the EVP and managing director of national retail lending for MiMutual Mortgage. With nearly 20 years of experience in the mortgage industry, he has previously had senior positions at American Financial Network, Residential Finance Corporation and Freedom Mortgage Corporation. Jacobs can be reached at djacobs@mimutual.com.

Insider Profile

Joe Detmer is branch manager for Brentwood, Tenn.-based Churchill Mortgage Corporation’s San Diego branch. Detmer brings more than 26 years of experience in the financial services industry. Prior to joining Churchill, he worked as a consultant for Land Home Financial and Skyline Homes (previously Rancho Financial), where he established partnerships with local industry affiliates. He has served as regional sales manager for U.S. Bank Home Mortgage and was instrumental in increasing the bank’s production volume by 600 percent in the San Diego region and surrounding counties.

Insider Profile

Jeff McGuiness is Chief Sales Officer for Embrace Home Loans, an approved lender for FHA, VA and an approved seller servicer for FNMA, FHLMC and GNMA. Embrace Home Loans has remained a prominent leader in the industry, having provided hundreds of thousands of individuals and their families with mortgage loans, and now helping banks to provide home financing through its Affinity and Assisted outsourced mortgage solutions.

Good Headlines?

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Hey, guess what’s new? According to Richard Parsons in his August 17th commentary, there is a boom in bank lending. Banks such as Suntrust and JPMorgan Chase are experiencing increases ranging from 15.5% to 23%. Likewise, real estate values are going up and up. The trifecta of this development is of course the re-emergence of loan products that we never thought we would see again.

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What in the world is driving these trends? Well for one thing the inventory of previously owned homes is still rather low while builders are introducing new community developments in all areas of the country. For another, there are now down payment assistance programs either already available or under discussion and banks and investors are hungry for more yield in this continuing low interest rate environment.

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The primary result of all this news is that banks and investors are expanding their risk appetites, and because they believe that loan quality is once again healthy, they are willing to add more risk to their portfolios. This is evidenced by the increasing volumes of lending activity. Of course, the lending activity reflected in the bank’s number do not necessarily include those loans originated and funded by non-bank lenders which would increase those numbers even more. So should lenders break out the streamers and champagne? Are we back to the early 2000s with another round of increased borrowing just around the corner?

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Whoa! Wait a minute. Aren’t we still suffering under the regulations that were piled on after the collapse of 2008? While the obvious answer to that is a qualified yes, in reality the industry is starting to realize the opportunities available from these reversals of fortune. The question is not should we take advantage of these opportunities, but have we learned enough to avoid the same cataclysmic result. Let’s take a look at the issues.

Credit risk, in the form of both underwriting policy and product development prior to the crash, was expanding to include some very hazardous policies. Stated income loans had been offered as early as 1988 to employees of companies that moved and were eligible for their relocation programs. In less than 12 months it became evident that even these stellar borrowers were having difficulty making payments on stated income loans. Yet any additional reviews of the potential for inaccurate income to be used in these loans was either never done or not published. Furthermore, credit criteria in the form of debt-to-income ratios were also pushed ever higher without any acknowledged analysis taking place. Now of course, the ATR and QRM requirements are in place for federally regulated institutions but what about those who are not?

Regardless of these issues, the most significant process failure prior to the meltdown was Quality Control. If nothing else was gained from this catastrophe we learned that the program dictated by the agencies was less than useless. Even though the steps were followed, lawsuits focused on this failure has run into the billions. Yet the agencies have done little to change the requirements despite the fanfare surrounding the new dictates.

So, now we find ourselves in an environment with rising home prices, low interest rates and banks taking on more risk. History tells us this does not look good. It would wise for all of us to remember, “those who fail to learn from history are doomed to repeat it.”

About The Author

Rebecca Walzak

rjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak, a leader in operational risk management programs in all areas of the consumer lending industry. In addition to consulting experience in mortgage banking, student lending and other types of consumer lending, she has hands on practical experience in these organizations as well as having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

A New Take On Integrations

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Over the past few years there has been a significant change in philosophy on vendor integrations within LOS technology. The industry’s best service providers are superior in their space and when integrated properly with an LOS bring additional value through more elegant solutions.

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Having 100 or even 500 service provider options doesn’t do a lender much good if the integrations do not include all the important features the vendor offers, or requires a manual review of the results. Lenders are not looking for 10 doc prep vendor options, 5 pricing engines selections and 22 credit bureau pulls to choose from, but would rather have one or two solid, dependable, effective solutions to accurately and efficiently integrate into their everyday workflow. Integrations between an LOS and their third party vendors require countless hours of time, attention, communication and commitment. If an LOS has integrations with 5 or more doc prep vendors, how much time do you think they are really putting into building each of those relationships? How often are they making upgrades when they have so many to work through? What’s their strategy to integrate an optimal workflow or user experience?

Nowadays, lenders are looking for the best providers and are seeking quality over quantity. Loosely bolted on tools are no longer acceptable, instead the demand is for high functioning solutions that are “lights-out” bi-directional interfaces. Exceptional integrations run in a manner that reduces user efforts yet delivers the final results automatically. Vendor integrations demand a large amount of time and attention from both parties. It is the job of the LOS provider to find who is the best at what they do in each of the essentials – pricing engines, document providers, compliance, fraud and fulfillment services – and then build strategic partnerships.

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It’s critical to have bi-directional communication between the two systems. Why is that important to the lender? Efficiency, accuracy, productivity. To maintain compliance, the LOS must always be the data source of record. Today’s best integrations can run automatically; the lender would only address the exception. For flood determinations that means a lender is only alerted when the property requires flood insurance. For compliance that means the lender is alerted when a fee is not allowed or there is a high cost issue. For fraud that means the lender only completes additional due diligence when an alert to identified.

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The questions a lender should ask when reviewing their integration options are:

How is the LOS’s relationship with their integrated vendors maintained? How often are they making upgrades and advances to constantly better the solutions? Who is the first line of communication when there is a pain point with the integration – meaning, can you reach out directly to the LOS for solutions, or are you going to be tossed back and forth between the LOS and third-party vendor?

The LOS is the backbone of your lending operations, and there are excellent options to simplify your lending complexities with the right LOS who can support all your needs and provide you with remarkable third party integrations.

About The Author

Lionel Urban

Lionel Urban serves as CEO, founding partner and chairman of the board for PCLender, LLC; in this role, he is responsible for the overall strategic direction and the vision behind the technology development of the company. Prior founding PCLender, LLC, Lionel was a co-founder and CEO of Navigator Lending Solutions, Inc. (NavPros) a fulfilment services company specializing in mortgage banking services. Prior to NavPros Lionel was the co-founder, president and CEO of PCLender.com, Inc. from 1997 to 2011. During this time, he supervised the development of a pioneering, Internet-based mortgage technology platform that supports banks, credit unions and mortgage companies across the country. Since 1987 Lionel has acquired mortgage banking experience in management, origination, operations, secondary marketing and compliance roles within banks, credit unions and independent mortgage bankers.

The Real Vote That Lenders Need To Cast

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The November election is not the only choice lenders face as they make decisions regarding the future of the mortgage industry. As the legal obstacles to electronically-signed loan documents fall and more consumers demand electronic documents for their home-buying process, lenders must evaluate and decide which of the two formats best serve their needs.

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On one side is the dynamic data-driven Securable, Manageable, Archiveable, Retrievable and Transferable document (MISMO SMART Doc). On the other side is the Adobe Portable Document Format (PDF).

Which format will win the hearts and implementations of lenders everywhere? While it’s too soon to know for sure, there are some key differences between the formats lenders should know.

Understand the Issues – What is Different Between the Formats?

SMART Docs and PDF-based documents both reach the same outcome – a legally binding loan document. However, each format uses a different technology and provides different benefits to the end user.

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From a technology standpoint, an electronically signed SMART Doc is a single electronic document with five sections. These sections are XML-based and the creation, viewing, signing and storage are all typically completed in a Web-based environment.

PDF Documents on the other hand, are often created in another application and converted to the PDF format which is then viewed within a Web browser or through stand-alone utilities like Adobe Reader.

While there are significant differences, eSigned SMART Docs and eSigned PDFs each have benefits useful to the lender. The choice is driven by each lenders’ individual needs, but it is also important to consider that the two types of eDocuments are not mutually exclusive. For example, a SMART Doc can include an embedded PDF file that has been electronically signed.

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Many advocates of the SMART Doc tout the format’s native Web structure and data integrity. The SMART Doc Version 1.02 format has also been implemented by most eClosing technology providers. Most importantly, it is the only electronic note format currently accepted by Fannie Mae.

SMART Docs are data-driven and system agnostic. They do not require proprietary software to implement, and the format can automatically extract loan data. SMART Docs also provide an extra level of data security with an Audit Trail feature that can track every change made to the document and provides a secure record of all signatures, deliveries and modifications.

The challenge to SMART Doc eNotes has often been around implementation. Lenders and financial organizations trying to consolidate technology formats for electronic documents across all departments have also struggled since few industries outside mortgage lending use XML for binding legal documents. The required XHTML View (for SMART Doc Category 1 eNotes) can also create inconsistent displays on different Web browsers, and print rendering can be inconsistent. This is a headache for consumers who want a simple process to view, print and sign documents.

eSigned PDF documents, which have been in use longer than SMART Docs, are the most widely used format by mortgage lenders and other financial services, even though most investors still do not accept them. These documents are also legally binding (remember, the legal foundations of ESIGN and UETA are technology-neutral), and eSigned PDF files are accepted by many industries outside of mortgage lending. PDF documents are arguably easier to implement and present a consistent display across all Web applications. In addition, all eSign providers can electronically sign PDFs. PDF documents are also easy for the borrower, since free PDF reader software is readily available for home computers, allowing borrowers to easily receive, view, save and print the documents for their own records. However, it is more difficult to embed data into PDF Documents in a standardized format, something that SMART Docs were designed for from the start.

Is There a Third Party?

While the selection of SMART Doc or PDF sounds like an all-or-nothing decision, there have been recent changes to the proposed formats that incorporate the best of both formats. The MISMO SMART Doc V3 protocol (an inherent part of the MISMO Version 3.x Reference Model XML specifications) includes both the native XML Data section and a View section that can contain any file format, including PDF, images, Microsoft Word and others. This closes the gap between the formats by providing a consistent, standardized structure for all loan documents – disclosures, closing and title – with XML data along with an easy-to-use PDF view for consumers.

Fannie Mae and Freddie Mac are also looking hard at ways to facilitate broader eMortgage adoption, per their FHFA Scorecard mandate, and moving to SMART Doc V3 with PDF View is one consideration. In addition, the MERS® eRegistry allows for registration of PDF or SMART Doc V3 eNotes through the Data Point registration method, eliminating one of the biggest obstacles to embracing one format over another. These considerations are being vetted within the MISMO eMortgage Workgroup, which will meet in person in Crystal City, Virginia during the week of September 12 – see www.mismo.org to register and join us there.

While neither PDF nor SMART Doc 1.02 answer the industry’s need for a universal intelligent electronic document format, SMART Doc V3 with a PDF View provides a universal View format coupled with intelligent, standardized XML data. Widespread adoption could be spurred on by broad investor acceptance, which could be led by GSE acceptance and an associated timeline for required delivery.

Today’s top document vendors can already dynamically generate multiple output formats. Adding the SMART Doc V3 to their systems would be relatively easy, and would provide lenders nationwide with the data security, technology and usability needed to propel electronic loan documents into the mainstream.

About The Author

Harry Gardner

Harry Gardner is executive vice president of eStrategies for Docutech, a leading provider of compliance and documentation technology. Founded in 1991, Idaho Falls, Idaho-based Docutech offers a wide range of solutions to institutions all over the world. From document generation and imaging support to eDelivery, digital signatures and print fulfillment, Docutech sets the standard in providing market-proven technology and unrivaled client service to you, your workforce and your clients.

The Father Of Longevity

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The old maxim “necessity is the mother of invention” has long been used to describe change and innovation. Consistency can then be called the father of longevity as it is paramount to ensure that a company is around for the long haul.

We have witnessed several economic cycles and many companies come and go since we started in 1986. When we started TeleVoice, the average interest rate was close to 11 percent, cell phones were a rarity, serious computing still meant mainframes, and that whole Internet thing was still a few years off. Consolidation in the mortgage servicing industry had not begun, and there were hundreds of servicers managing relatively small portfolios.

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The regulatory environment also was very different 30 years ago. An entire alphabet soup of agencies and rules have since sprung up. Servicers operations a now dominated by considerations of CFPB, TRID, TCPA, RESPA, SPoC, TILA, UDAAP, HMDA and more.

Over the last three decades, the only real certainty has been change. Adapting to address inevitable changes has been the challenge for servicers and vendors alike.

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For a company to survive and thrive in this ever-changing industry, we have learned that we must be consistent. We must be consistent in our core principles and passionate about providing the very highest level of service to our clients. Here are a few guiding principles that have kept us on track and contributed to our longevity.

Strive to be a trusted partner to clients. Our clients face an array of challenges driven by market changes, customer expectations, portfolio growth, regulation and innovations in technology. Our role is to listen to their concerns and deliver recommendations tailored to their particular needs. That often requires the development of unique solutions, not just trying to use a standard application to address a very non-standard need.

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Provide over-the-top service in addition to top-tier products. Mortgage servicers rightfully expect dependable service from their vendors, but we have worked hard to develop a corporate culture of exceeding expectations. All team members understand that they are to go the extra mile to ensure that projects are completed on-time and any necessary resources are applied to promptly resolve support issues. The extra effort ensures better operations and builds lasting relationships.

Embrace change. Change is the reality of our lives, and consistency in our service to our clients requires that we not only acknowledge that truth, but that we build a culture that is quick to respond to change. To be of genuine value to our clients, we must adapt to their changing needs. A commitment to innovation makes it possible to ride the waves of economic and regulatory changes and survive when other are failing.

No one has a crystal ball, but it seems safe to say that the decades ahead will be filled with their own set of challenges. Whatever they may be, a steady and consistent business philosophy will be the key to long-term success.

About The Author

Barry Hays

Barry Hays is Co-Founder and Senior Vice President of TeleVoice, a provider of customized call center solutions, to the financial services industry. Barry may be reached by email at bhays@televoice.com.

Bloom’s Taxonomy

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Let’s start with describing Bloom’s Taxonomy. In 1956, Benjamin Bloom with collaborators Max Englehart, Edward Furst, Walter Hill, and David Krathwohl established a framework for categorizing educational goals. Generally referred to today as Bloom’s Taxonomy, this framework has been applied by generations of educators at all primary, high school, and collegiate levels.

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The Original Taxonomy (1956)

Here are the authors’ brief explanations of these main categories.

  1. Knowledge: Involves the recall of specifics and universals, the recall of methods and processes, or the recall of a pattern, structure, or setting.
  2. Comprehension: Refers to a type of understanding or apprehension such that the individual knows what is being communicated and can make use of the material or idea being communicated without necessarily relating it to other material or seeing its fullest implications.”
  3. Application: Refers to the use of abstractions in particular and concrete situations.
  4. Analysis: Represents the breakdown of a communication into its constituent elements or parts such that the relative hierarchy of ideas is made clear and/or the relations between ideas expressed are made explicit.
  5. Synthesis: Involves the putting together of elements and parts so as to form a whole.
  6. Evaluation: Engenders judgments about the value of material and methods for given purposes.

Although it received little attention when first published, Bloom’s Taxonomy has since been translated into 22 languages and is one of the most widely applied and most often cited references in education.

The Revised Taxonomy (2001)

One of the basic questions facing educators, whose core mission is to improve thinking, has been where to start. As always, definitions are in order. Before we can make a thing better, we need to know more about what the thing is.

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In 2001 a group of cognitive psychologists, curriculum theorists, instructional researchers, and testing and assessment specialists published a revision to Bloom’s Taxonomy that focuses on a more dynamic classification. The changes occur in three broad categories: terminology, structure, and emphasis.

A. Terminology: Changes in terminology between the two versions are readily apparent. In short, Bloom’s six major categories were changed from noun to verb forms. The use of verbs more accurately describes the cognitive processes by which thinkers encounter and work with knowledge. It is also notable that the top two categories are switched in this revision so that creating (formerly synthesis) occupies the top position

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Bloom’s Taxonomy

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Let’s look at the revised Bloom’s Taxonomy and add some reference to MISMO.

  1. Remembering: Retrieving, recognizing, and recalling relevant knowledge from long-term memory. MISMO: The initiative started with a small group of individuals organizing a list of data elements based on their past experience and interactions, partially influenced by their area of interest or expertise.
  2. Understanding: Constructing meaning from oral, written, and graphic messages through interpreting, exemplifying, classifying, summarizing, inferring, comparing, and explaining. MISMO: The first goal was to define a system or method to attach a label and definition of the data element in the hopes of identifying and eliminating duplicates. Obviously, there was a lot of discussion and different opinions.
  3. Applying: Carrying out or using a procedure through executing or implementing. MISMO: This was the Logical Data Dictionary (LDD. Looking back, it was probably the most significant achievement in exchange of information (data) between two entities where they both had the same definition. Although many feel we are in maintenance mode, the increasing focus on demand for more data-driven processes will continue to be a major initiative going forward.
    • The first 3 steps were building the foundation.
    • The next 3 steps were bringing it all together.
  4. Analyzing: Breaking material into constituent parts, determining how the parts relate to one another and to an overall structure or purpose through differentiating, organizing, and attributing. MISMO: Based on the XML standard at the time and our knowledge and experience, some of the earlier transaction sets were defined as Document Type Definitions (DTD). Specifically, they were created around defined transaction types, like credit, mortgage insurance, etc., independent of each other.
  5. Evaluating: Making judgments based on criteria and standards through checking and critiquing. MISMO: Next, the development of the schema and business reference model was also very significant. However, to the non-technical person, the visual of this model can be overwhelming. The need to get the business side involved is paramount to the continuing success of the organization and the industry.
  6. Creating: Putting elements together to form a coherent or functional whole; reorganizing elements into a new pattern or structure through generating, planning, or producing. MISMO: The development of the Logical Data Dictionary and the Business Reference Model by all the volunteer contributors from all areas of the industry was unprecedented. Kudos to all!

B. Structural: Structural changes to the taxonomy are well-considered and provide an easy-to-grasp understanding of the structure’s logical underpinnings. Bloom’s original cognitive taxonomy was a one-dimensional form. The Revised Bloom’s Taxonomy, with the addition of products, takes the form of a two-dimensional table. One of the dimensions identifies The Knowledge Dimension (or the kind of knowledge to be learned) while the second identifies The Cognitive Process Dimension (or the process used to learn).

C. Emphasis: Emphasis is the final category of changes. Bloom himself came to understand that his taxonomy was being used by many groups and organizations that never considered an audience for his original publication. In contrast, the revised version of the taxonomy is deliberately intended for a broader audience. Certainly, the same could be said for MISMO.

People around the world are familiar with the original Bloom’s Taxonomy and are not necessarily quick to embrace its change. After all, change is difficult for most people. The mortgage industry is no exception.

The goals for MISMO are threefold. 1) Increase adoption. 2) Increase membership, especially in the lender community. 3) Be cognizant of new opportunities to further the advancement of the standard.

My goal always is to present something that you might not have known about in the hopes that it will spur you to think differently. So, why do I bring this up? Are you focused on what MISMO is doing right now? Maybe you are and maybe you’re not, but if you’re not, you should be. Data standardization and the industrywide acceptance of that data standard is absolutely necessary for the mortgage industry to advance. Change may not be comfortable, but you can’t have true advancement without embracing change.

About The Author

Roger Gudobba

Roger Gudobba is passionate about the importance of quality data and its role in improving the mortgage process. He is an industry thought leader and chief executive officer at PROGRESS in Lending Association. Roger has over 30 years of mortgage experience and an active participant in the Mortgage Industry Standards Maintenance Organization (MISMO) for 17 years. He was a Mortgage Banking Technology All-Star in 2005. He was the recipient of Mortgage Technology Magazine’s Steve Fraser Visionary Award in 2004 and the Lasting Impact Award in 2008. Roger can be reached at rgudobba@compliancesystems.com.

The Disappearance Of Appraisers

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There is a common misconception that AMCs are unconcerned with the problems affecting appraisers. AMCs should be viewed as business partners for appraisers, offering appraisal assignments and ready to assist the independent appraiser to better understand the regulations and rules that are constraining the business and provide guidance on how to better navigate those challenges. AMCs are a part of the industry as a whole and we believe they share in the responsibility to reverse the declining number of appraisers. AMCs can, and are, taking action to both change restrictive policies and increase the number of licensed appraisers. There will be dramatic consequences for all in the mortgage appraisal industry if the number of appraisers continues to decline at the same rate. Through lobbying, education and policy change, AMCs believe they should help reverse the trend of appraisers leaving the business.

Strain on Appraisers

The decline in appraisers over the last few years has been steep. The average annual rate of decrease is approximately three percent – a cumulative decline of 22 percent since 2007 (Appraisal Institute Research Department). As large of a decline as this is, there is the potential for these numbers to become even more dramatic in the future. More than 62 percent of appraisers are over the age of 51, and only 13 percent are younger than 35. The lack of youth in the profession and the decline in appraisers can both be tied to increased barriers of entry into the profession.

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Currently, certified level appraisers are expected to have a four-year college degree, two additional years of apprenticeship and pass certification requirements. The four-year college degree does not need to be in a field of study relevant to appraising and some suggest a school for appraisers would impart more relevant and valuable skills than an unrelated four-year degree. What’s making the apprenticeship period more difficult is that many lenders refuse to accept appraisals that include the signature of a trainee on the left side, though the supervisory appraiser does take full responsibility by signing on the right side. It’s incredibly difficult to find people to train as potential new appraisers because they’re being asked to work and train for some 2,500 hours without being able to establish their own reputations by signing their own work.

Appraisers are backlogged in work and some try to complete 2-3 appraisals a day, on top of making corrections to any existing appraisals and submitting their work through multiple systems to multiple companies. The workload and demand on their time has risen sharply. Appraisers are under immense pressure to be organized, efficient, adaptable, and accurate despite the increasing workloads. With only 24 hours in each day, those appraisers who fall behind suffer from stress, long hours driving and exhaustion. While many would benefit from an apprentice or trainee appraiser, many appraisers are not sure how to manage that situation to the ultimate benefit of both parties. Many appraisers strive to minimize risk and asking an individual to risk his hard-won reputation and business by using unseasoned appraisers is a risk many are not willing to accept.

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What can AMCs do to provide assistance to bridge this chasm? It’s an issue which needs an immediate solution. Time is not on our side. Given that it takes two to three years to move from trainee status to fully licensed appraiser, the industry requirements have guaranteed there will be no quick relief for several years. While some argue technology is the future, AMCs believe there will always be a need for human appraisers in the real estate business. Technology can change the way appraisers offer services, but can never replace the need for an unbiased, talented and experienced appraiser.

Strain on AMCs

The same strain impacting appraisers is occurring at AMCs. With the decline in overall numbers, there are less qualified appraisers able to take on the burdening expectations. AMCs are forced to search harder for qualified appraisers. The means more time and resources are allocated to dig deeper into databases to find the most qualified appraisers. This forces AMCs to search for appraisers who are further away from the property to be appraised. In some circumstances AMCs may have to search for appraisers outside the county, and even, very rarely, across state lines. While these problems may be less visible in more urban areas where there are still many appraisers to choose from, the shortage is impacting the more rural or isolated areas the hardest.

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Effects on Appraisals

AMCs worry that if the decline in appraisers continues, it will have a negative effect on the quality of appraisals. AMCs strive to find the most qualified and informed appraisers to make decisions on properties. The further away from the subject property an appraiser is, the larger the possibility for potential error based on lack of geographic competency. Although many AMCs currently have large vendor networks and are currently able to find the most qualified leads, in time, with fewer appraisers offering services, it will potentially affect the accuracy, turn time and quality of the appraisal market as a whole.

Another substantial goal AMCs have is to protect the value of appraisals over cheaper alternative valuation products such as AVMs. The time needed to complete an appraisal would increase with the continued decline in the number appraisers. This increasing wait could come with mounting pressure for appraisals to be substituted by other valuations products, which do not have the insight, accuracy or accountability of an appraisal. In this area, AMCs can help ensure the value of the appraisal product while fighting for more appraiser friendly regulations and policies. Ultimately AMCs need to work with appraisers to change the overly restrictive regulations surrounding the sector.

Potential Solutions

The current environment needs to change to better protect the appraisers at the center of the industry. In order to reach solutions it is up to the mortgage industry to increase its voice to influence policies. AMCs are taking action to change the current environment. Many AMCs are joining the Real Estate Valuation Advocacy Association (REVAA) who lobby for positive change for the industry. REVAA and other non-profit trade associations monitor public policy and serve as an important resource to federal and state regulators and policymakers. They work on creating solutions with policy makers about the attrition of appraisers and ensure the movement to halt the decline is a top agenda item.

There are many innovative ideas on how AMCs can help combat the decline in the number of appraisers if policies were changed. This includes AMCs starting their own training programs, but these ideas are often limited by existing rules and regulations. As long as AMCs’ ability to affect change is limited by government regulations and existing lender policies it is harder to address the root causes of the lack of appraisers. Outside the policy sphere, more information needs to be published for potential recruits on the benefits of working as an appraiser. The ability of appraisers to work their own schedule, own their own shops and the flexibility of working for themselves are major draws for younger people interested in the profession. More potential recruits need to know that an appraisal career can offer security, stability and has the potential to be lucrative if well-established.

The final way AMCs can help reverse the decline of appraisers is to take responsibility over their operations and relationships. AMCs need to do more to directly help the profession become stronger and better. AMCs need to treat their appraisers right; with respect, reasonable turn times, and fair and adequate compensation. AMCs must be held accountable for their part of the relationship. The healthier a relationship that can be formed between AMCs and appraisers, the more attractive it will be for future appraisers to join the field. Simply by acknowledging and guaranteeing that AMC s value the work of appraisers, AMCs can help attract more people to the field.

From Discussion to Action

AMCs are very aware of the decline in the number of appraisers, and have been feeling the same strain that appraisers are all too familiar with. AMCs are having the hard discussions of what can be done to support the appraisal profession and are working towards finding solutions to reverse the decline in the number of appraisers. While the lack of appraisers is fundamentally affecting the length of time to acquire and fund financing in several states, if the current rate of decline continues, there will potentially be very big problems soon. While there are still many discussions to be had on how to fix the problem, AMCs and appraisers must work together to correct current trends before it’s too late.

About The Author

Wynetta Byers

Wynetta Byers is Chief Appraiser at LRES, a national residential and commercial real estate services company providing valuations, REO asset management, HOA and technology solutions for the mortgage and real estate industry. For more information about LRES, visit its website at www.lres.com.

Perfect Your E-Mail Marketing

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A lot of mortgage technology vendors send out e-mail newsletters, but are they effective? What’s your production process like? How can you improve it? These tips and tools can help you optimize your workflow.

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“Defining your e-mail marketing campaign strategy and goals helps guide the direction of your campaign and makes it easier to measure the success of your efforts,” states the following infographic by Litmus and Movable Ink.

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Ask yourself what actions you want your subscribers to take, why they should care about your company, whom you’re sending the email to, and how you’ll measure its success.

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“Set deadlines for each step of your production process to ensure everything is completed on time,” suggests the infographic.

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Breaking Down Barriers

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Last year the Property Records Industry Association (PRIA) prepared a white paper to provide all recording jurisdictions with confidence that the concept of electronic notarization is valid and acceptable in the process of recording documents in the public record.

This paper was limited to the discussion of electronic notarial acts as related to land records and recordable documents. PRIA has subject matter expertise in this area. It seeks to answer key questions and dispel misperceptions surrounding notarization in general and electronic notarization.

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Traditionally, and to this day, for paper documents to be recorded, the notary’s ink signature (and seal or stamp, where required) must be affixed to the document to provide physical, visible proof that the formalities of notarization occurred. However, once the paper document leaves the presence of the notary, he or she has no control over document alteration.

Electronic signature technology can heighten document security by making electronic documents tamper-evident. Utilizing technology that heightens document security allows the public land records industry to have more confidence in the authenticity and validity of recorded documents.

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Many parties rely on the veracity of the documents in a real estate transaction. In addition to the seller and buyer, lenders, title companies and investors all must have confidence in the transaction’s documentation. In the paper world that confidence comes, in part, from the fact that multiple stakeholders are involved in completing the transaction. A real estate agent, an appraiser, a lender, a home inspector, a title examiner, a closing agent and a notary all have essential roles in the transaction. Together, they comprise what some call a “web of trust.”

In the electronic world, these parties can be aided by automated systems with audit trails that show who interacted with the documents, and when. Secure methods of transmission and tamper-evident seals allow us to verify that documents were received unaltered. Thus, the confidence we gain from the knowledge that a web of stakeholder parties reviewed the transaction is bolstered by the digital forensic evidence that is inherent in electronic document transactions.

Non-repudiation essentially means that enough process control and evidence exists to defend against a borrower saying, “I admit that that document was signed, but it wasn’t actually me who signed it,” or claiming that the document was altered after they signed it. Technologists and attorneys may view this concept differently.

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Because of the availability of audit trails and other electronic evidence, technologists claim a greater level of non-repudiation for electronically signed documents. We can log which computer the document was signed on, and which user ID and password were used to log into the eSignature system and access the document. And while this is certainly true, attorneys might argue that we still don’t know who was sitting at the keyboard pressing the Enter key, or what their state of mind was at the time of the event. Some eSignature systems also validate the borrower’s identity by asking several “out-of-wallet” questions (things that only the borrower should know about previous addresses or loan payment amounts), and/or record a video log of the signing event.

The audit trails and electronic evidence that these automated systems can provide are best understood as reinforcements to the traditional web of trust created by the multiple stakeholder parties that touch the transaction. The notarial event within that web of trust is one that can be bolstered by these technologies, building even greater confidence than was ever available with paper documents.

PRIA suggests that the authority granted by ESIGN and UETA simply provides notaries a new method—an electronic signature—of affixing the notary’s official signature to the notarial certificate on an electronic document. PRIA encourages states to adopt regulations that help notaries comply with fundamental requirements applicable to all notarial acts, paper-based or electronic, while allowing the broadest possible range of electronic signature technologies.

And today innovative vendors are making it easier for lenders to embrace this strategy. For example, World Wide Notary LLC (WWN), a leading eNotarization solution provider, announced a major partnership with NotaryGO, the leading signing service across the nation.

The new partnership will provide NotaryGO’s more than 71,000 notaries, title notary attorneys, and mobile notaries with access to WWN and its partners’ technology.

The management team at NotaryGO has been in the signing service industry since 1986. During that time they have signed millions of residential loans, auto loans and structured settlements. The NotaryGO signing agent database includes thousands of bilingual certified, reverse mortgage certified and eClose certified signing agents. The company’s signing agents are all background checked and hold the proper licensing per state guidelines. The company can deliver a consistent signing in all 50 states, 24 hours a day, 7 days a week, which takes organization, planning, structure and most of all effort. NotaryGO is the nationwide signing solution.

Currently WWN and NotaryGO are and will be soliciting targeted closing attorneys, notaries and mobile notaries that are the best of the best. These notaries will have access to WWN’s DigaSign eClosing system and the capability to service eMortgage lenders and title with fully eMortgage closings in their specific cities and states.

“The mortgage industry is increasingly adopting the eMortgage process. Lenders, banks and title companies are looking to move to a complete electronic process,” said Bob Rice, CEO of WWN. “We are successfully leveraging the DigaSign eNotary integration with our strategic business partner DocMagic, which offers a comprehensive TRID, document preparation, eSigning, eDelivery and eMortgage technology. We integrated our eNotarization system with DocMagic’s platform through a secure eClosing room that is MERS registry eVault compliant. We are please to bring these electronic tools to the industry while increasing compliance, decreasing errors and saving significant amounts of time and money.”

Based in Vernon, Texas and founded in 2003, WWN has developed DigaSign, an innovative, simple, Internet-based service that expedites the signing and/or notarization of documents by utilizing electronic and digital signatures and electronic notarizations. WWN completed the first fully electronic, mortgage closing in California in 2008 and the first electronic real estate closing in Texas in 2004. Pioneering electronic signatures, as early as 1996, WWN’s management team has many years of experience working with stringent Federal mandates, such as HIPAA, E-SIGN, UETA and NASS regarding security and the use of electronic journals, digital signatures and electronic seals.

Rice continued: “These are just a few of the benefits that WWN/DigaSign will be able to provide to the NotaryGO eClosing notary network. NotaryGO can now place a DigaSign eNotary anywhere a title or mortgage company needs a fully eMortgage and eClosing process.”

The DigaSign solution allows borrowers, lenders, settlement agents and mobile notaries to eSign documents and eNotarize — both online and offline. As a result, the entire closing process is streamlined, paper is eliminated, costs are reduced and compliance is ensured

WWN is one of the most dominant eNotarization companies and has long been at the forefront of educating and lobbying the state Attorneys General and Secretaries of State to accept eNotaries in a variety of different industries. The company’s technology has been certified by multiple Secretaries of State under the National Association of Secretaries of State (NASS) eNotary standards; and, in all states that have approved the Uniform Electronic Transactions Act (UETA).

A number of efficiencies accompany WWN’s DigaSign eNotary technology that includes dramatically speeding up the notary process on mortgage documents, with Internet connection or without, ensuring strict compliance adherence is met, establishing detailed audit trails, reducing errors, slashing processing costs, reducing risk, and enhancing the overall borrower closing experience. The solution centralizes and streamlines the entire eNotarization process. Now it’s time for lenders to use this and other technologies to simplify the entire lending process.

About The Author

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.

The New World of REO Disposition

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The servicing market has changed significantly since the mortgage market imploded in the mid-2000s where we saw dramatic increases in loan defaults and foreclosure volumes. These heightened volumes impacted servicers and those companies handling default services, property preservation and REO disposition. While REO, short-sales and foreclosures have existed for quite some time, the sudden influx of foreclosures and rapidly expanding REO inventories lead to significant growth opportunities in a sector that traditionally flew under the radar.

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REO and property preservation no longer fly under the radar. The increases in foreclosure volumes also ushered in a wave of new scrutiny from the OCC, DOJ and CFPB. Servicers were forced to deal with a flood of new rules and regulations on the federal, state, and local municipality levels which resulted in greater scrutiny, higher fines and higher costs to perform the required property preservation and REO services.

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Even though we are emerging into a more stable REO market, asset management servicing firms are still being pressed to be able to dispose of REO properties in a timely and compliant manner.

To improve results, stronger field execution is paramount. Servicers need to look for an REO asset manager with an experienced nationwide network of field service specialists who can act quickly and effectively to optimize the value and marketability of their REO properties. This involves much more than simply securing and maintaining the physical asset. The provider must be staffed with REO professionals – including vendor management specialists and broker specialist teams – capable of working closely with real estate professionals, vendors, title companies, law enforcement officials and attorneys to assure better outcomes at every phase of REO asset disposition.

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A nationwide network that includes both brokers and field service professionals provides an up-close, informed view of each property, particularly if the asset manager also provides upstream pre-foreclosure services. This early and ongoing exposure arms the asset manager with the property-specific knowledge and experience needed to apply the most efficient, effective approach for each asset in the lender’s REO inventory.

The key is rapid deployment of knowledgeable field resources on a neighborhood-by-neighborhood, property-by-property basis that can accurately and compliantly deliver proven results. Providers who can perform at this level are re-defining responsive REO service.

Servicers can expect a number of benefits as they strengthen relationships with asset management companies capable of working effectively across both REO and pre-foreclosure fronts:

>> Shorter Asset Resolution Cycles – Actively managed brokers move REO properties in less time than do unmanaged brokers. Working with asset managers offering direct local monitoring of individual brokers, lenders can expect to move properties in 90 days or less. Re-assigning unsold properties to new brokers – a costly and time-draining process – is rarely needed. In addition, when resources are focused at the neighborhood and individual property level, there is a greater incidence of properties selling above asking price.

>> Reduced Costs – Lower commissions and/or fees, economies of scale, and stronger asset control with fewer compliance problems deliver substantial cost-saving potential.

>> Smarter Property Marketing – Experience-based knowledge of each property and neighborhood leads to smarter valuations and more productive selling strategies. With in-depth REO expertise and proven strength on the ground, well-integrated asset management firms are able to create and apply the right marketing approach for each REO property.

>> Pre-Marketing – With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, asset management companies offering both pre-foreclosure and post-foreclosure services are uniquely positioned to create and apply the right marketing approach for each REO property. This includes recommending auction or traditional sales methods, preparing detailed property/market analysis, as well as providing turn-key auction management or assigning a broker, as appropriate.

>> Marketing – REO asset managers who can offer comprehensive property marketing services are helping REO properties return maximum market value in minimum time. Qualified providers offering direct local execution and oversight can mount complete marketing campaigns, including detailed weekly marketing reports. Most importantly, they can and assume full responsibility for individual broker monitoring/evaluation, a distinct advantage over the arms-length relationships characteristic of many REO asset disposition programs.

>> Closing Services – Well-qualified REO asset management organizations can provide the people and expertise to coordinate and certify closing documents, organize and attend the closing, collect and distribute funds, and disseminate closing information. All in strict accordance with client, legal and regulatory requirements (title procurement, HUD-1 review and approval, escrow/closing coordination). These capabilities and more are well within the scope of forward-thinking REO asset management organizations prepared to excel in the new integrated service environment.

Effective marketing is critical to successful REO asset disposition. However, to be consistently effective, REO Marketing is best understood as part of the overall asset management process, not a substitute for it.

Disposition Alternatives

With today’s REO inventories, not all properties are suited for sale through traditional channels. Alternate strategies, particularly for low-value, high-risk properties, must be identified, assessed and implemented, as appropriate. REO asset management providers with strong field service networks can be highly effective partners in helping to leverage these opportunities, whether bulk transactions, transfers to development agencies or public auction. That said, property-by-property marketing continues to represent the most effective alternative for the majority of REO assets.

Property-by-property optimization of REO assets requires independent process management and localized control. What’s needed is an REO asset management partner, who knows the property and its pre-sale history, can plan and execute property preservation/enhancement services, understands municipal ordinances and code compliance issue, and can objectively assess, select and manage local brokers.

The Right REO Partner

With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, asset management companies offering both pre-foreclosure and post-sale services are uniquely positioned to create and apply the right marketing approach for each REO property. This includes recommending auction or traditional sales methods and preparing a detailed property/market analysis, as well as providing turn-key auction management or assigning and managing a broker, as appropriate

The right REO service provider can deliver maximum REO results in minimum time. Qualified providers offering direct local execution and oversight can mount complete marketing campaigns and property-by-property follow up, including on going detailed progress reports. Most importantly, they can assume full responsibility for individual broker monitoring/evaluation, a distinct advantage over the arms-length broker relationships characteristic of many REO asset disposition programs. Successful REO asset disposition means knowing the property and tailoring a marketing strategy to match; and second, being able to apply independent, on-the-ground monitoring of the disposition process. Integrated REO asset management companies with strong field service networks are uniquely qualified on both fronts.

Comprehensive Solution, One single Source

The fact is, disposition of REO assets is a multi-front affair. Success means winning a series of small but important battles. It takes knowledge of the property and local market awareness to critically assess BPOs and the brokers who provide them. It takes experience and follow through to evaluate and monitor property-marketing activities. It takes strong field presence to assure the grass is cut, trash is removed, interiors aren’t gutted or vandalized, the HOA isn’t ready to enforce a lien, and fines for municipal code violations aren’t accruing. It takes people, skills and know-how to negotiate cash for keys.

Integrated REO asset management providers with proven pre-sale and post-sale capabilities are in the strongest position to help servicers address these and other needs critical to REO asset success.

Improving and streamlining default and REO processes will remain a primary focus of servicers and their field services partners as regulatory compliance becomes more urgent and complex. The field service provider’s first step in navigating these realities will be to become an even more capable and efficient resource – a true problem-solving partner who understands both broad market forces and the servicer’s particular needs and business circumstances.

About The Author

Nickie Badalamenti-Kalas

Nickie Badalamenti-Kalas is president at Five Brothers. She works directly with Five Brothers CEO, Joe Bada, to oversee the daily operations and long term strategic vision of Five Brothers. A dynamic entrepreneur, business leader, and skilled executive who brings leadership, insight, and new strategies that drive customer satisfaction, revenue growth, and profitability.