**By Tony Garritano**

***The government has and will again come into our space with programs to avert foreclosures. I would assert that some foreclosure will and have to happen regardless of the government’s good intentions. Instead of pushing plans on servicers, the real foreclosure fix is to empower servicers to work with these borrowers in a more meaningful way so workouts last and foreclosures that are inevitable happen and clear the way for faster recovery. How do you do this? For example, PROGRESS in Lending has learned that IndiSoft has released enhancement to its RxOffice Premium Counselor Edition. The enhanced version of the company’s module gives counseling agencies a tool to better manage internal business operations including various kinds of counseling offered and the day-to-day activities at the agency. The module also features the ability to electronically post data to the HUD Housing Counselor System. Here’s the scoop:

****The surge in the number of homeowners needing counseling to make informed housing decisions has increased exponentially during the last two years. RxOffice Premium Counselor Edition can be used by any HUD-approved agency participating in HUD’s Housing Counseling Program. These agencies are required to use a client management system to track their counseling activities and any information or data provided. By using the RxOffice module, agencies have an automated means of collecting, storing and transmitting HUD required information.

****“Timely reporting to HUD in their specific format is an essential part of a counseling agency’s day-to-day process,” said Sanjeev Dahiwadkar, CEO of IndiSoft. “RxOffice Premium Counselor Edition takes this time-intensive process and give agencies the tool they need to quickly and efficiently manage the unprecedented number of consumers who need assistance.”

****RxOffice Premium Counselor Edition is a web-based case management tool that is highly scalable and flexible. The module features a secured, proprietary messaging system to send to and receive messages from other users and can be integrated with email software to auto-file inbound/outbound emails with associated cases.

****In my view we need more technology and less one-size-fits-all government plans to get us back on the road to prosperity.

**Alliances Tighten**

***The mortgage industry is very complex. As a result, more and more companies are looking to other companies to form synergies. For example, PROGRESS in Lending has learned that United Guaranty, a national mortgage insurance company, announced today an expansion of its strategic alliance with Optimal Blue, the award winning comprehensive, Web-based platform that couples pricing and secondary marketing automation with content management for the mortgage industry. Here’s the scoop:

****United Guaranty customers can receive United Guaranty MI rate quotes and pull MI rate history while searching for investor pricing and eligibility in Optimal Blue. Under the agreement, within Optimal Blue, United Guaranty automatically delivers a mortgage insurance quote for up to five products at a time along with locking capability to originators who have a master policy, and an MI premium estimate to lenders who have not established a relationship with United Guaranty.

****“This added functionality gives users mortgage insurance pricing and comparisons to FHA pricing—without leaving Optimal Blue,” said Chris Clement, SVP-Field Production at United Guaranty. “We’re leading the industry in the investments necessary to simplify processes for customers and help loan officers get borrowers in the right loan.”

****In today’s environment, lenders must leverage every advantage to respond to consumers quickly and accurately. Within the Optimal Blue platform, users now have access to United Guaranty’s Performance Premium risk-based MI pricing, enabling them to receive either an instant estimate or a detailed quote. Users can pull a PDF of the MI quote, and because each loan has an MI history, users can also go back at any time if the loan criteria change and a new quote is needed. Users also have the option to lock the detailed quote with UG at any time.

****“Optimal Blue has always prided itself on being able to deliver the most value to mortgage lenders,” explains Lawrence Huff, co-Founder and co-CEO of Optimal Blue. “This partnership exemplifies that philosophy – as it gives customers the ability to not just lock in an MI quote, but to stay within the Optimal Blue platform. We continue to advance our platform to create the most automated workflow, giving our customers accurate data quality, better control and compliance, and improved profitability.”

****“This exclusive partnership with Optimal Blue shows our commitment to provide MI accessibility in all scenarios. This lets originators get a rate quote quickly and easily, cutting the time required to know a loan’s cost,” said Clement. “Providing the MI quote during the eligibility stage lets users know in one location that they’ve met general MI requirements.”

**CoreLogic Data Tells The Story**

***CoreLogic released its December Home Price Index (HPI) report, giving the first look at full-year 2011 price changes. The CoreLogic HPI shows that including distressed sales home prices in the U.S. decreased 4.7 percent in 2011 (compared with one year prior). This year-end report shows that home prices continued the trend of year-end decreases—this is the fifth consecutive year with a decrease in the HPI. The HPI excluding distressed sales showed that home prices decreased by 0.9 percent in 2011, giving an indication of the impact of distressed sales on home prices in 2011. Here’s the findings:

****The report also shows that national home prices including distressed sales decreased 1.4 percent on a month-over-month basis, the fifth consecutive monthly decline. However, the HPI excluding distressed sales posted its first month-over-month gain since July 2011, rising 0.2 percent.

****The December drop in home prices follows a decline of 4.3 percent in November of 2011 as compared to one year prior. Excluding distressed sales, year-over-year prices declined by 2.0 percent in November 2011 compared to November 2010. Distressed sales include short sales and real estate owned (REO) transactions.

****“While overall prices declined by almost 5 percent in 2011, non-distressed prices showed only a small decrease. Until distressed sales in the market recede, we will see continued downward pressure on prices,” said Mark Fleming, chief economist for CoreLogic.

****Highlights as of December 2011

****Including distressed sales, the five states with the highest appreciation were:  Montana (+4.4 percent), Vermont (+4.0 percent), South Dakota (+3.1 percent), Nebraska (+2.5 percent) and New York (+1.7 percent).

****>> Including distressed sales, the five states with the greatest depreciation were: Illinois (-11.3 percent), Nevada (-10.6 percent), Georgia (-8.3 percent), Ohio (-7.7 percent), and Minnesota (-7.5 percent).

****>> Excluding distressed sales, the five states with the highest appreciation were: Montana (+7.7 percent), South Dakota (+3.5 percent), Indiana (+3.3 percent), Alaska (+3.1 percent), and Massachusetts (+2.9 percent).

****>> Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-9.7 percent), Minnesota (-5.2 percent), Arizona (-4.9 percent), Delaware (-4.2 percent) and Michigan (-3.5 percent).

****>> Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to December 2011) was -33.7 percent.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -24.0 percent.

****>> The five states with the largest peak-to-current declines including distressed transactions are Nevada (-60.0 percent), Arizona (-51.9 percent), Florida (-50 percent), Michigan (-43.7 percent), and California (-43.5 percent).

****>> Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 81 are showing year-over-year declines in December, one more than in November.

****Full-month December 2011 national, state-level and top CBSA-level data can be found at http://www.corelogic.com/HPIDecember2011.

**By Tony Garritano**

***I want to start today’s column by saying that I am not a football fan, but when I got this today I could not resist sharing it because I know a lot of people love football. Veros Real Estate Solutions (Veros), a collateral valuation technology, enterprise risk management, and predictive analytics provider, said that it can’t predict whether the New England Patriots or the New York Giants will win Super Bowl XLVI on Sunday, Feb. 5. However, its real estate market forecast tool, VeroFORECAST, can provide some insight into the housing market where the stadiums for each team resides for the coming year, ending February 1, 2012. Here’s the story:

****New England Patriots

****Gillette Stadium, home of the New England Patriots, resides in Foxborough, Mass., approximately 21 miles southwest of downtown Boston. VeroFORECAST foresees a relatively stable and flat market with only 0.7 percent depreciation forecasted for the Foxborough area over the next 12 months due to favorable interest rates. Housing supply is currently down by more than half from the peak of the housing crisis and unemployment rates are in the mid six-percent range, which is better than the national average at 8.7 percent. Thus, there is not an expectation of significantly depressed housing prices.

****New York Giants

****MetLife Stadium, home of the New York Giants is located in East Rutherford, New Jersey and is the most expensive NFL stadium ever built, as well as the largest stadium in the NFL in terms of permanent seating capacity. A part of the New York Metropolitan area, East Rutherford is forecast to see depreciation during the next year of 3.6 percent in its market. Housing supply has remained constant for an extended period of time without significant declines. The unemployment rate has stayed near the national average, previously stated to be at 8.7 percent.

****As host city to Super Bowl XLVI, Indianapolis’ housing market is forecasted to appreciate 0.9 percent in the coming year. The market did not experience the big run up in prices associated with many other still struggling markets and housing supply overall appears healthy. Affordability here remains steady with the unemployment rate hovering around the national average. Thus the outlook for home prices looks positive for the future with no significant upward or downward pressures.

****Veros’ most recent VeroFORECAST for the national housing market for the 12-month period ending December 1, 2012 can be found in the company’s online newsroom.

****What a hoot. There’s great information here. I hope you enjoyed this as much as I did.

**First National Bank of Pennsylvania Profiled**

***In an effort to get rid of several front end and back end systems, PA-based First National Bank of Pennsylvania has opted to switch its LOS to Avista Solutions. First National Bank, the largest subsidiary of F.N.B. Corporation (NYSE: FNB), recently launched the Avista Agile LOS retail platform. Here’s why they chose Avista:

****First National Bank previously managed its mortgage lending operations from two separate front-end and back-end systems, which led to a less than optimum workflow process. The bank launched a search for a new system that could offer full transparency of information and in turn increase efficiency and data accuracy. After whittling its candidates down to four, the bank chose Avista Solutions as its best fit.

****It wasn’t just transparency that tipped the scales in Avista’s favor – the system’s web-based, software as a service (SaaS) model was also a deciding factor for First National Bank. Avista’s web-based format allows loan originators to easily take work into the field and keeps the bank from having to tap into its own internal servers for hosting purposes.

****DataMart, Avista’s onsite data storage and reporting tool, was another feature that won over First National Bank. The bank wanted the ability to produce a variety of reports that could be moved onto its servers quickly, and Avista’s DataMart stood out among competing reporting tools. Additionally, Avista’s data mining capability was important because of its potential to enhance cross-sell opportunities.

****Avista also offered a flexible implementation process that impressed First National Bank decision makers.

****“We chose Avista because the system has an infrastructure that can accommodate our growth,” First National Bank of Pennsylvania Senior Vice President and Real Estate Services Manager Rhoan Hernandez said. “Also, we can streamline and create an efficient, virtually paperless credit process. Not only is this environmentally friendly, but it will also ultimately improve the level of service we offer our customers.”

**By Tony Garritano**

***Lenders today are trying to be more risk averse. But is it working? CoreLogic released its fourth quarter 2011 multifamily applicant risk (MAR) analytics. The fourth quarter MAR Index value increased three points from the previous two years showing a higher renter credit quality through the end of 2011. Here’s the scoop:

****The MAR Index for fourth quarter 2011 is based exclusively on applicant traffic credit quality scores from the CoreLogic SafeRent statistical lease screening model and is updated quarterly to provide property owners and managers with a benchmark against which to compare their portfolio’s performance. With this unique applicant risk index, property managers and owners are able to compare their applicant credit quality trends with that of the average MAR Index trends. This comparison indicates whether their portfolio is performing above, below or at market levels with respect to attracting and securing applicants with higher credit quality and an increased likelihood of fulfilling their lease obligations.

****When compared to the fourth quarter of 2010, the MAR Index increased three points in overall national renter credit quality, indicating a slightly better applicant pool. When comparing applicants for one- versus two-bedroom units, the MAR Index is slightly higher for one-bedroom units at 101, compared with 100 for two-bedroom units in the fourth quarter. The fourth quarter 2011 national MAR Index, which includes studios, one-, two-, three- and four-bedroom units (BR), was 101. This is a three point decrease in overall national renter credit quality from the third quarter value of 104, largely reflecting seasonal fluctuation typical of lower applicant traffic periods of first and fourth quarters.

****Regionally, the South and Midwest had the lowest MAR Index with values of 97. The Northeast continues to have the highest MAR Index with a value of 110. From a Metropolitan Statistical Area (MSA) perspective, the three MSAs with the leading decreases in the MAR Index were Buffalo-Niagara Falls, N.Y.; Miami-Fort Lauderdale-Pompano Beach, Fla.; and Phoenix-Mesa-Scottsdale, Ariz.; with decreases of three, one and one point, respectively. The three MSAs with the leading increases in the MAR Index were San Jose-Sunnyvale-Santa Clara, Calif.; San Antonio, Tex.; and Salt Lake City, Utah; with increases of five points.

**By Joe Dombrowski**

***Many institutions have grown accustomed to having one system for first lien mortgages, another system for second liens, yet another for lines of credit secured by real estate, and possibly even a fourth system to accommodate other installment loan products. A stratified operating environment may also have separate systems to help manage collections and investor accounting.

****Having multiple platforms can challenge executives charged with trying to rein in costs, sustain regulatory compliance, ensure data integrity and drive operational excellence. Since those systems likely use entirely different processes and procedures, the ability to have a collaborative lending strategy on an enterprise scale is severely limited. A multiple-platform approach also impacts the borrower experience because inefficient processing dashes expectations for real-time, right-now updates and customer service. Furthermore, since each system requires maintenance and support, there is significant – and costly – duplication of effort, driving up the cost of servicing and wasting manpower.

****Developing, enhancing and maintaining efficient processes can be severely challenging for organizations using multiple servicing platforms.

****>> Chief Operating Officer – Monitoring compliance metrics and generating the necessary audit reports from multiple software applications is labor intensive and cost prohibitive. The effort required to provide enterprise-level oversight can divert attention away from more beneficial duties, such as fine tuning day-to-day performance that promotes both efficiency and profitability.

****>> Chief Information Officer – Managing data integrity throughout the organization can be problematic. Each servicing system has its own architecture, making the infrastructure and networks extremely difficult to manage and maintain. Disparate systems may not link together, making the validation and certification of customer data exponentially more challenging.

****>> Chief Compliance or Risk Officer – There is heightened risk for the organization when regulatory changes must be duplicated across verticals, making compliance initiatives much more difficult to implement and manage. Identifying potential vulnerability and risk, and developing corrective resolution plans, can put unwarranted stress on staff resources. Maintaining transparency while successfully addressing compliance initiatives can further challenge the organization.

**By Tony Garritano**

***Those fingers are flying over mobile keyboards with people now spending, on average, 94 minutes per day using mobile applications, according to analytics firm Flurry. Meanwhile, web consumption, on both desktop and mobile devices, has started to show a slight decrease. Realizing this trend PROGRESS in Lending was the first business-to-business mortgage publishing company to expose our content as well as mortgage industry Tweets, cutting-edge white papers and prominent research reports all within a free app that you can now get on iTunes. For your convenience the app is called called Progress in Lending. With the expansion of mobile technology, PROGRESS in Lending has learned of an LOS that is now joining the mobile revolution. Here’s the story:

****Mortgage lending technology provider LendingQB announced the availability of mobile app companions to their cloud-based, end-to-end loan origination system. The LendingQB apps are designed to enhance the loan closing process by keeping loan officers in constant contact with their loan origination system. “Mobile applications need to be more than a gimmick,” said Binh Dang, LendingQB’s managing partner. “The LendingQB mobile apps provide useful functionality that helps loan officers stay on top of their loans and foster better communication with their customers.”

****Available for free on both Android-based smartphones and Apple’s iPhone, the LendingQB mobile app is linked directly to the full LendingQB mortgage loan origination system and provides mortgage professionals with the ability to view real-time status updates of loans in their pipeline, as well as track when loan milestones have been achieved.

****The LendingQB mobile app also includes a loan pre-qualification and pricing tool that is linked to LendingQB’s built-in automated underwriting engine, PriceMyLoan. Users can enter in loan scenarios and instantly view eligibility and real-time pricing results. Loan scenarios can be saved for quick access at a later time.

****“Our mobile apps are designed to leverage the best features of our full loan origination system, but in a way that makes sense,” said Linn Cook, marketing director at LendingQB. “Providing loan officers a snap shot of their loan pipeline not only keeps them informed, but it cuts down on the amount of calls that loan processors and underwriters have to field. Additionally, using a smartphone to get instant quotes on loan eligibility and pricing lets loan officers make a powerful impression on prospects and generate more leads.”

****LendingQB is a 100% web browser-based loan origination system designed for mortgage lenders and bankers. A set of tools are available to facilitate a seamless end-to-end mortgage workflow process, from loan origination to funding. But the cloud-based aspect of the system is what enables LendingQB to deliver a unique mobile experience.

****“Web-based or cloud-based computing is no longer an experiment, it’s become a virtual necessity in the business world,” said Cook. “The same can be said about mobile computing. It’s not just about emails or playing games. We believe that mobile loan origination is going to transform the way that mortgage lenders do business. Our goal is to keep our clients on the leading edge of mortgage technology.”

**First Centennial Mortgage Profiled**

***First Centennial Mortgage has maximized secondary market revenue and efficiencies using the Secondary Interactive platform. Many lenders transition to mandatory delivery specifically for the financial gain, however, as exemplified by First Centennial, the operational benefits can be equally significant. Here’s how significant:

****According to executive management at First Centennial, a substantial operational impact was felt on the lock desk, where the company leveraged automation to create a more efficient workflow, enabling them to redeploy resources and save overhead costs. The workflow is driven by SI’s real-time data, another advantage for First Centennial, providing the opportunity to create a faster, more efficient flow of the file – the quicker those loans are out the door and purchased, the bigger the mark up for the lender.

****According to First Centennial’s Executive Vice President, Dave McCormick, “For a lender, identifying leakage is the Holy Grail – figuring out where your risk or problem areas are can be critical to secondary market health. Using SI’s tools, and more specifically, reporting tools, we are able to identify the smallest amount of leakage down to a very granular level. The difference between great programs, such as SI, and others in the market is the ability to identify errors and leakage. SI’s platform spotlights the issues using real time data, which then allows First Centennial to maximize secondary marketing revenue and efficiencies through best execution and loan allocation optimization.”

****First Centennial also benefits from the integrated platform with Optimal Blue (“OB”), ensuring loans being committed in the platform are guaranteed to have a saleable loan matched to Optimal Blue’s investor overlays. One mismatched loan can be very expensive to correct, and the unified platform between SI and OB enables First Centennial to deliver loans with virtually no opportunity for slippage.

****McCormick continued, “For lenders without a product eligibility and pricing engine (PPE), this process can be daunting. We got comfortable with a PPE and best efforts first, getting the staff used to a centralized lock desk. After that, making the move to mandatory was not difficult. SI was a great partner, who made the transition seamless – from educating us to securing investor relationships. SI held our hand throughout the process to ensure a smooth experience.”

****Don Brown, co-president of Secondary Interactive said, “First Centennial is a lender that “gets it”. They understand how to succeed, and their staff is made up of intelligent, talented people that know how to take advantage of automation to create benefit. Whether our clients are looking for a partner or looking for the best technology, SI is the right platform. There is no better opportunity for a lender than the use of real time, accurate data. We are the only platform that has it and it shows – our customers are successful and empowered. We appreciate customers like First Centennial, we invest in their success and when they win, we do too.”

**By Nancy Alley**

***Can you believe 2011 is almost here? It has been an interesting year, with much change, many new regulations and some interesting announcements. And, as with every year, as January quickly approaches, I think it is best to reflect on the past by making resolutions for the future.

****Before I share with you the first of what I think would be good industry resolutions, let me say that while people tend to get bold in their personal goals – dreaming of a complete overhaul of their shortcomings – I’ve come to the conclusion that an industry revolution is unlikely. Instead, we need to make some joint resolutions to evolve.

****So, take a read and feel free to add your thoughts. I am by no means claiming to have the perfect solution for the industry, so I’d love to hear your ideas on how we can improve.

****Resolution #1: Embrace the Inevitable Change

****Let’s state the obvious – the past few years have been a rollercoaster of change and turmoil. And while some would like to believe everything has been figured out, I think 2011 has more change waiting on the doorstep. To name a few:

****>> Dodd-Frank: With massive compliance changes ahead, how will we sort through the impact and know how to react?

****>> A contracting market: Industry analysts predict as much as a 40% contraction. How can we do more than just brace for the fall?

****>> A potential GSE overhaul: The secondary market as we have known it may look very different going forward.  What does this mean for our future business models?

****While many view change as an obstacle (it often is), I would argue that it also creates tremendous opportunity. It pushes us to grow and evolve. It forces us to create new plans, new responses and new approaches. The old adage of “business as usual” rarely works for long when an industry is required to take new steps to reach better heights.

****The changes we face as an industry are an invitation to act and improve. So, rather than fight change as we often want to do, let’s make a collective decision to direct our energy to finding unique solutions to face interesting challenges. Let’s start by having a discussion and sharing best practices from how your organization has faced a challenge head on.

****For me, the change that lies ahead just gives me hope for a great 2011. What about for you?

**By Tony Garritano**

***Who said technology is a bad bet? Well, it’s not. In a down market, technology can be the differentiator needed to succeed. And I’m not the only one that feels this way. PROGRESS in Lending has learned that JP Morgan has given a prominent mortgage technology vendor a new $20 million line of credit. Here’s all the details:

****ISGN Corporation, has obtained a $20 million secured line of credit from JPMorgan Chase Bank, N.A. (“J.P. Morgan”). It is a line of credit available through November 21, 2012, subject to certain conditions, enabling ISGN to utilize the entire $20 million immediately to take advantage of significant market opportunities in the first half of 2012. It refinances and replaces a $15 million line of credit previously provided by a different bank and is priced at an improved interest rate of 3.25 percent plus LIBOR subject to certain terms and conditions.

****ISGN’s majority shareholder, Chambal Fertilisers and Chemicals Limited, based in New Delhi, India, enjoys a close business relationship with J.P. Morgan and provided the support necessary for ISGN to secure the funding at these favorable terms.

****“This is a solid line of credit from one of the preeminent names in global banking,” said Shailendra Gupta, chief financial officer of ISGN. “The $20 million credit line by J.P. Morgan, combined with $30 million in additional funding ISGN obtained from its investors last summer, positions us well going into 2012 to bring to market a number of new and improved solutions for our lender and servicer clients.”

****ISGN touts that it has more than 1,000 customers, including large global banks and many of the top 10 lenders in the country. ISGN’s product line includes a complete range of solutions for lenders, brokers and servicers. ISGN is funded by venture firms New Enterprise Associates (NEA) and IndoUS Venture Partners (IUVP), and by CFCL Overseas Limited, an SPV of Chambal Fertilisers and Chemicals Limited, a KK Birla Group company. Based in Melbourne, Florida, ISGN now employs more than 1,000 people across six domestic centers and two international facilities.

**By David Lykken**

***If you ask anyone in the mortgage industry today, “What are you stressing about these days?” most would say: “LO Compensation”. Surprisingly, loan volumes being off by as much as 40% to 50% is not stressing folks out. Honestly, I can’t think of anything that has challenged the hearts and minds of mortgage professionals like LO compensation. It doesn’t matter if you are the owner, executive or loan production manager trying to determine which approach to LO compensation is best for your company, or if you are a loan originator wondering how your company’s new comp plan is going to affect your ability to make a living. Everyone is stressed to the max over all this.

****And frustrating matters even more, the Feds have done almost nothing to help answer many legitimate questions that have arisen from this “new rule”. Even after the March 17^th Webinar put on by the Board of Governor of the Federal Reserve System entitled “Regulation Z, Loan Originator Compensation,” more questions remain unanswered then answered. As the saying goes, “After all has been said and done, more has been said than done.”

****I believe technology can be a powerful tool in finding solutions to things like LO Comp. Over the Christmas holiday I had the idea of using the social media technology of LinkedIn to sort through the confusion and find a solution. After searching the Internet and finding nothing, I started the LinkedIn “Discussion Group” called “Loan Originator Compensation Changes & New Rules”. The membership of this LinkedIn group has grown to approximately 2,300 industry professionals. In this case, one of the benefits of the social media site LinkedIn, is that it has allowed executives of companies of all sizes to connect with loan originators and bounce ideas off other top originators across the country as well as get the thoughts of subject matter experts (attorney, accountants, consultants, trainers, etc.) that I invited to the discussion group. As a result, many companies are in the process of releasing compensation plans with a greater degree of confidence knowing that their plan has been thoroughly vetted out online.

****Another technology our consulting firm used to sort out and work through the problem is an old fashion spreadsheet. While a spreadsheet cannot resolve areas of ambiguity related to the language in Reg-Z’s “new rule”, it can help us logically structure arguments based upon the absolutes of the new rules and then zeroed in on the variables. This has allowed our clients to present their LO Comp plans in a meaningful way to their loan originators. With tools like a well-thought-out spreadsheet, loan originators are able to see on a comparison basis what they would have earned under their old compensation plan compare to what they will be earning under the new compensation plan.

****So in times of stress, remember technology can be a helpful tool to cut through the confusion and get to a solution that is both practical and profitable.

**New Research Reveals Critical Flaws**

***The flight to quality is a big concern in the mortgage industry. Especially with all the increased scrutiny from investors and regulators, lenders have to do everything possible to originate quality loans. New data that PROGRESS in Lending got from Interthinx shows that existing quality control programs may not be going far enough. Interthinx has identified two major defects in the outsourced Quality Control programs of lenders that affected residential mortgage loan files in 2011 and may pose significant risk in 2012. Here’s the scoop on their findings:

****According to Interthinx, 40.9 percent of its Quality Control findings relate to missing documentation or data integrity issues. Eligibility and credit issues account for only 18.3 percent of 2011 findings. “Many in our industry will be surprised to learn that more than 40 percent of our findings last year were related to missing documentation or data integrity issues,” said Connie Wilson, executive vice president.

****“It’s significant when comparing this recent data to data from 2006 to 2009 when missing documentation only accounted for 7.1 percent of all findings,” said Wilson. “If lenders are not outsourcing their quality control processes, they should at least consider having someone from the outside take a look at their processes. If a lender’s internal quality control process mimics their internal originations process, the lender could easily miss documentation or data integrity issues.”

****“The shift towards manufacturing defects in 2011 from historical borrower eligibility issues is a significant finding,” added Jeremy Burcham, director of quality control for Interthinx. “Today’s borrowers are very well qualified for the most part. However, a well qualified borrower does not always protect lenders from elevated defect rates or even repurchase issues. The lender’s loan manufacturing process needs to be sound in all areas to avoid potential repurchase. A simple breakdown can leave the lender on the hook for a loan that should have been bulletproof.”

****The Quality Control process provided by Interthinx includes learning how each client does business to assist in identifying critical issues from application to close. Interthinx provides lenders statistics on the individuals who deal with their loans on a daily basis to identify training and process needs and to help lenders gain more confidence about the loans they originate.

****“If lenders haven’t used outsourced quality control in the past, 2012 may be the year to try it,” noted Wilson. “To reduce repurchase requests, most major Government Sponsored Enterprises (GSEs) recommend having an independent source back up internal processes.”

**By Tony Garritano**

***Tonight my older son will be performing in a school play. I love the school plays. They’re just great. As a parent you sit in the audience looking at your child shine and it’s truly amazing. So, today I’m in a great mood. As such, I want to spread that mood to you. To this end, in a departure from the usual bad news of the day, I want to be positive today. There are companies that are doing well in this environment and you can do well, too. Here are two examples of successes:

****First, PROGRESS in Lending has learned that Mortgage Cadence, LLC saw tremendous growth in 2011, enabling an aggressive trajectory for 2012. Due in part to the partnering of Monitor Clipper Partners and Mortgage Cadence in 2010, this acquisition allowed Mortgage Cadence to expand its technology offerings.

****By ramping up staff in 2011, Mortgage Cadence was afforded major system advancements. For one, the company deployed its private cloud in late 2010, boasting 99.999% uptime to date. In addition, Mortgage Cadence Symphony and Orchestrator are now delivered through a private cloud and are available immediately to clients anywhere with an internet connection. Also, both solutions now include Opus out of the box, which enables OCR forms recognition and indexing of mortgage and mortgage related documents. Opus also supports data extraction and comes with a compare feature in the Orchestrator lending platform, which compares the data in the system to the data on the document. This is an important feature for compliance and post-closing quality assurance.

****CEO of Mortgage Cadence, Michael Detwiler, provided insight into what some describe as the cutthroat nature of the mortgage industry, “Many technology providers have chosen not to evolve to meet the heightened demands of the current industry and instead update their systems only when necessary in an attempt to remain compliant with regulations and lenders’ needs. By not taking the lenders’ businesses beyond a manual and often disparate process, these vendors are competing in an industry that will soon leave them behind. Mortgage Cadence has left the competition behind this past year by excelling where others have failed.”

****Also, Capsilon, a provider of cloud-based document sharing, imaging and collaboration solutions, reported the company has doubled its monthly revenues in 2011 despite market challenges and achieved this milestone in August, three months before its fiscal year ended.

****Capsilon attributes its success to its technology advancements, signing new clients and the growth of existing clients, including two of the top 10 residential mortgage lenders in the U.S., which were signed in 2010. To accommodate this rapid growth, Capsilon expanded its leadership team, hiring two senior level executives: David Sohm as chief operating officer and Sheila Plunkett as vice president of Sales.

****The company introduced Katalyst 7 to enable financial institutions to extend collaboration and enhance workflow of electronic documents across organizational boundaries. Katalyst Enterprise Edition was also introduced in 2011 for larger financial institutions and integration partners to more easily manage and share electronic documents by seamlessly connecting existing workflow systems, document repositories, loan origination and other operational systems with Katalyst via an API toolkit.

****“We strive to continuously create and enhance electronic document management technology to fulfill the needs of financial institutions regardless of their size,” said Sanjeev Malaney, chief executive officer of Capsilon. “The effort to reduce the use of paper documents has been a growing trend which we expect to accelerate in 2012. With increasing regulations and growing cross industry collaboration needs, the adoption of cloud-based, paperless technology will be vital. We make every effort to alleviate industry communication gaps, make the transition to paperless seamless, enhance document sharing and help companies provide higher levels of service to their customers.”

****So, here you have two companies doing well. Why are they doing well? Because they’re innovating and meeting the needs of their clients. So, success is possible, even in a down market.

**By Randy Schmidt**

***As origination volumes decline and lenders battle for prospective borrowers, it is critical for lenders to be where their potential borrowers are.  A recent study showed that there are 51.5 million potential homebuyers born between 1979 and 1991.  This group of people commonly referred to as “millennials” comprise nearly a quarter of the total US population.

****This represents a critical target audience for lenders.  Virtually every member of this group can be found online.  Therefore, lenders must have an online lending presence that meets the needs of this potential audience.   By not having an online channel, lenders are missing out on a tremendous opportunity.

****But online lending shouldn’t be thought of solely as a separate channel, but a as an extension of your existing lending channels.  By allowing loan officers, correspondents, third party originators and help desk personnel access to your online lending tools borrowers can receive the same up to the minute information and service levels regardless of the channel they choose.  This multi-channel approach allows for a consistent borrower experience that creates customer satisfaction and builds loyalty.

****The key to successfully integrating these lending channels is through a single dynamic online lending platform that can be specifically tailored for each channel.  Some of the solutions on the market today try to sell multiple products addressing each channel separately and then claim seamless integration.  This significantly adds to the total cost of the solutions and presents obvious integration challenges.

****Do you really want to have to train your staff on multiple systems?  What about the time and effort in maintaining multiple systems?  The ability to successfully integrate all of these separate solutions adds complexity and the potential of integrity issues to the equation.  As lenders are pushed to do more with less, having multiple systems to maintain and integrate is simply not a prudent business decision.

****What lenders need is one dynamic single online lending platform that works across all lending channels.  A solution that can be specifically tailored to the unique needs of borrowers, loan officers, correspondents, third party originators and help desk personnel.  This can improve the user experience for each of these groups while reducing the overall cost of ownership for lenders.

****In today’s highly competitive lending environment, being able to deliver a consistent borrower experience across all lending channels through a  dynamic single online lending platform improves customer satisfaction in the most cost effective manner.

**By Tony Garritano**

***We hear a lot about the REO issue these days. Let’s face it, it’s dragging our industry down. So, how do we fix this? We need more players to step up with creative solutions. For example, PROGRESS in Lending has learned that Carrington Holding Company, LLC (Carrington) has an agreement with certain investment funds managed by Oaktree Capital Management, L.P. that will fund an initial purchase of up to $450 million in distressed single family homes on a national basis. These homes will be managed as rental properties by Carrington, to meet the growing market demand for rental units, and as part of the industry’s effort to remove distressed properties from the sales inventory to help stabilize the housing market. Here’s the scoop:

****Carrington, which currently manages over 3,000 single family rental homes under Fannie Mae’s Tenant-in-Place and Deed-for-Lease programs, was the first company to pursue a strategy of renting out REO (lender-owned) properties, and has developed a national field services network along with a proprietary software system that allows for centralized property monitoring and management.

****“We believe that re-deploying vacant REO properties into rental homes is a way to help revitalize the housing market,” noted Carrington Founder and CEO Bruce Rose. “Reducing the number of distressed properties for sale can help stabilize home prices and putting families into currently-vacant homes can begin the healing process for neighborhoods that have been damaged by foreclosures.”

****“Carrington’s REO rental program is an excellent fit for our investment strategy, which includes a broad range of debt and equity investments in real estate-related investments and restructurings.” said John Brady, Oaktree’s head of global real estate.  “We believe that this is not only a unique investment opportunity with few qualified large-scale competitors, but one that also has the potential to have a broader positive effect on the housing market and the overall economy.”

**By Joe Dombrowski**

***Today’s “survival of the fittest” environment has lenders evaluating ways to refine processes throughout the enterprise. Duplicating effort across multiple products and managing the expense of supporting and/or integrating disparate platforms hurts the organization in terms of profitability, operational efficiency, and compliance and risk mitigation – ultimately jeopardizing borrower relationships.

****In many cases, the technology landscape in the financial services industry includes redundant, inefficient and incompatible systems that are increasingly costly to maintain. Although the servicing system you have today might work, the productivity improvements, potential FTE redeployments and ability to support a more diverse loan portfolio resulting from consolidating loans can dramatically offset the cost of converting to a newer technology.

****Because past focus has been on vertically siloed products and business lines – some with patchwork interfaces – some institutions have not addressed upgrading or integrating their servicing operations. As a result, they are unable to compete with the flexibility, round-the-clock availability and operating efficiency that the “new normal” of the banking industry demands.

****It is time to consider handling mortgage, home equity and other consumer loans on one platform. This approach to managing the back office can help forward thinking organizations reap the full benefit offered by an integrated solution that streamlines processes, allows more complete access to borrower data and enhances the customer experience.

****Not addressing IT budgets and technology decisions holistically could adversely affect the borrower experience and could even impact profit margins. Disparate servicing platforms cause operational inefficiencies.

****The industry’s proliferation of different technology systems and standards was the result of an older business model that centered on quasi-autonomous business lines and the absence of enterprise-level oversight. Organizations developed or purchased systems for product-specific purposes, and they were built on a variety of operating systems, data standards and process formats.

****Fast forward from that environment to a point several years ago when lending institutions began to realize that these systems could not share data or functionality and that millions of dollars were being spent on overlapping systems. Lenders that use different loan servicing systems to support different consumer loan products – mortgages, lines of credit and installment loans – are wasting internal resources. Using multiple platforms inhibits the efficient use of data and makes enterprise-wide customer views more difficult and costly. Being able to post a payment quickly and accurately no longer distinguishes an institution. The information associated with the payment has become more important than the payment itself. The loan servicer still processes transactions, but now must also be an information broker to survive.

****How effectively an institution can capture, store, find, associate, analyze and deliver financial data is what will provide its strategic differentiation, and hence its value, to customers. This transformation places enormous demands on an institution’s technology, requiring it to be integrated, customer-focused and enterprise-wide, as opposed to siloed, product-focused and department-based.

**A New Alliance Forms**

***ProLender Solutions, Inc., a paperless mortgage lending software, has launched a new interface with the DataVerify DRIVE risk mitigation system. The interface will allow ProLender users to access the DRIVE platform to verify borrower and property information to aid in detecting possible loan fraud. Because the two systems work together seamlessly, ProLender users will save time and avoid possible data entry mistakes.

****“We’re pleased to partner with ProLender Solutions to provide their clients with access to the DRIVE platform,” said Kent Johnson, Vice President at DataVerify. “The combination of ProLender’s robust processing platform with DataVerify’s powerful risk mitigation system gives mortgage lenders the tools they need to improve productivity and loan quality, reduce risk, and enhance profitability.”

****From within the ProLender system, users export key information directly into the DRIVE platform. ProLender automatically launches an Internet browser where users enter their login. The DRIVE report results display on the user’s screen. The entire process only takes seconds and adds an important safeguard against fraud.

****“This interface saves our clients time, eliminates re-keying data and most importantly provides a valuable fraud detection tool,” said Kevin Roczey, President at ProLender Solutions, Inc. “It just makes sense to integrate the two systems.”

****The DataVerify integration can be run multiple times throughout the loan process. With just a click of the mouse, the user receives a thorough analysis of the borrower and property information in order to make an informed evaluation on each and every loan.

***Everyone talks about the importance of loan quality, but what does it mean? Over 125 mortgage executives gathered at PROGRESS in Lending’s ENGAGE 2011 industry event. They talked about real issues and solutions. A panel composed of distinguished technology vendors, service providers and lenders discussed how you can truly produce better quality loans today. Here’s what they said:

www.youtube.com/watch?v=LS0Lxfwy4ao

**By Tony Garritano**

***The current mortgage market has been unkind for sure. Originators, among others, have been hurt for sure. How much? I just got research from Hammerhouse LLC, a national recruiting and strategic growth firm for the financial services industry with mortgage sales and leadership placement at its core, that is very telling. The company released the results from its Second Annual Survey of Originator Opinions. This 14-question survey was completed by approximately 400 active mortgage loan originators and asked originators for their opinions on critical issues facing the mortgage industry and impacting their job performance. Here’s the findings:

****Originators responses indicate a strong preference to:

****>> See clarification of regulatory issues outstanding in the industry.

****>> Work with regional rather than national lending organizations.

****>> Find a home with financially secure lending organizations with effective operations and marketing.

****>> Value the leadership, communication, integrity and culture of an employer.

****>> Work with a recruiter to identify potentially better matched opportunities.

****“Mortgage loan originators have had a difficult couple of years. The housing crisis and regulatory responses have led to a 50% decline in the ranks of originators according to the US Bureau of labor Statistics,” commented Drew Waterhouse, Managing Director of Hammerhouse. “However, those that remain are focused on rebuilding the mortgage industry to make it the best it can be by demanding that lenders are executing effectively for consumers.”

****The Survey questions cover important factors from each of the six core business areas identified by Hammerhouse as integral to the model-matching relationship between originators and lenders: Leadership, Culture, Business, Operations, Technology and Geography. Particularly encouraging for an industry that has experienced such turmoil is the fact roughly one-third (31%) of respondents indicate that they have been in the industry for more than four years. Moreover three-quarters (76%) indicate that they, or their companies on their behalf, are investing in tools, training/coaching and other resources to improve performance.

****The complete 2012 Survey of Originator Opinions results can be viewed at http://www.teamhammerhouse.com/?p=1685.

**Solving Real Issues**

***CoreLogic, a provider of information, analytics and business services, today announced its Winter 2012 Mortgage Fraud Consortium Members’ Meeting beginning January 23, 2012. The three-day meeting is a unique, member-driven forum that invites lenders responsible for more than 80 percent of U.S. mortgage originations to discuss emerging mortgage fraud trends, interact with industry experts and share best practices. The Consortium is a cooperative initiative of the industry’s top mortgage lenders formed for the purpose of jointly understanding, detecting, and preventing mortgage fraud more effectively than each lender can individually.

****The keynote speaker is Rachel Dollar, a Certified Mortgage Banker and renowned attorney who represents lenders and secondary market investors in mortgage banking litigation matters. She is also editor of the Mortgage Fraud Blog, an acclaimed website for news and information on mortgage fraud and real estate fraud throughout the United States. Ms. Dollar will speak on the ongoing challenges of short sale fraud along with contractual provisions and litigation strategies to help attendees better define their approach to fraud loss recourse. She will also provide insight on recently litigated fraud cases.

****“There is great value in lenders sharing data, information, and insights to identify common fraud trends,” commented Rachel Dollar, Esq., CMB, of Smith Dollar PC. “The CoreLogic Mortgage Fraud Consortium creates a secure forum for lenders to converse openly about pressing fraud issues. This is a very positive initiative for the mortgage origination industry as a whole because lenders, investors and consumers all benefit from better fraud management.”

****“Our goal is to ensure lenders are well-informed about emerging mortgage fraud trends and equipped to effectively mitigate those risks. At this meeting, we will demonstrate the industry’s newest fraud prevention technology that enables lenders to leapfrog forward in their detection efforts. We will also provide attendees with an exclusive preview of our Mortgage Fraud Prevention Best Practices Study detailing lenders’ fraud prevention processes in origination and servicing,” stated Tim Grace, senior vice president of Data & Analytics Product Management at CoreLogic. “The results highlight strengths in key process areas as well as identify actionable gaps where criminals may potentially find opportunities.” The complete study will be released by the end of first quarter.

****Additional guest speakers include Jerome Mayne, a convicted real estate criminal who will share his journey from CEO to prison in a presentation entitled, “Fraud & Consequences,” and Tim Gallagher, FBI section chief for Financial Crimes and the National Program Manager of the FBI’s White Collar Crime Program. In addition to the external speakers, five lenders will lead interactive presentations on the application of tools and techniques to Valuation fraud, Collusion and internal fraud, Origination fraud, Strategic default patterns, and Fraud patterns in loan application data.

****The Mortgage Fraud Consortium was founded in 2008. Members represent more than 80 percent of the U.S. mortgage originations market and have agreed to contribute their loan application and fraud outcome data in exchange for quarterly fraud reporting, analytics and access to CoreLogic consortium-based mortgage fraud products. Members of the Mortgage Fraud Consortium have contributed more than 90 million loan applications to date and are adding millions more each year.

**By Ted Hicks**

***Our industry loves buzzwords. But those buzzwords have created a lot of confusion in the market concerning technology as definitions vary greatly. Two of today’s most common buzzwords are “web-based” and “end-to-end”.  When we consult with lenders, we find that sometimes think that they want one thing but their actual need speaks to a different option.

****We hear a lot about the need to be “web based.” What does that really mean? Our lenders typically ask for web-based technology to have anytime, anywhere access and easier deployment without the need for resource-intensive applications.   But what they don’t realize is what they are asking for is already available—through the use of their current client-server model or even mobile applications.

****The term client server is lumped in with terms like antiquated and rigid. That’s just not the case. The client-server model has become flexible enough that client server can now be deployed over the Web as an ASP.   Client servers can enable off-line activity and automatic uploads of off-line files to the server upon the next login.

****Mobile applications, although not widely accepted or used in the mortgage industry right now, provide global 24hour access without unwieldy installations.  Mobile applications are, in essence, client server applications, not web applications viewable on a mobile screen.  These “mobile servers” are designed to keep us plugged in wherever we are without the performance, control and security issues that they can sometimes experience with a true web-based system.

****Our second buzzword du jour, “end-to-end” has also created a stir among our clients.  Let’s talk a bit about what end-to-end really means. End-to-end is different as compared to all-in-one. When you are talking end-to-end you need to define the starting point and the stopping point. You can be end-to-end when it comes to processing only, for example, or you can stipulate the starting point as the 1003 and the stopping point as the 1^st payment after closing.  “All-in-one” is a complete package that includes all forms, documents, services, and servicing.

****That means a system where just one vendor provides every single one of the services for which you would normally use best-of-breed third-party vendors.  Look at it this way:  you would typically expect an LOS to offer expertise in mortgage origination software.  If you see one that also claims to be a document services company or a flood certification company, what is the likelihood that it is going to be able to provide excellence in all business models at the same time? More often than not, quality will suffer in one or more of the “businesses.”  If you find a system touted as “all-in-one” and look closely at its capabilities and functionality, you’ll find that they just don’t have what it takes to be “all-in-one.”

****What does all this really mean to you?  It means that there are options for you.  Rather than immediately jumping on the buzzword bandwagon, truly analyze your functional needs in a platform.  You may find that you already have what you want and need.   But you won’t know until you move beyond the buzz and get to the facts.

**By Tony Garritano**

***As lenders embrace Software as a Service, security concerns arise. Is it safe? What about how it will protect sensitive information? The truth is that SaaS is safe. As proof, there are certificates that can ensure a level of security that all lenders should ask for. For example, PROGRESS has learned that IndiSoft, a technology development firm that provides software as a service (SaaS) solutions based on a collaborative rules-based workflow platform for the financial services industry, has achieved the ISO 27001:2005 Information Security Management System Standard. Here’s the scoop on this standard certificate:

****This certification verifies IndiSoft’s practices for software development, licensing as well as support services and will give its U.S. clients added assurance that they are working with a company that operates using well-established, reputable principles. The ISO 27001:2005 ISMS Standard is a series of documents established by the International Organization for Standardization (ISO), the world’s largest developer of international standards.

****“We have always believed in a process-driven approach, and this certification provides our clients with a level of assurance in our operations, as well as confidence in our existing systems and their alignment with international work practices and standards,” said Sanjeev Dahiwadkar, president and CEO of IndiSoft. “Our technology delivers transparency in auditing processes and ensures compliance for our clients. This accreditation is an acknowledgement of our systematic approach to managing their secure information.”

****ISO is a network of the national standards institutes for 162 countries and created the standard to set international requirements for quality management systems. Adopted today by more than 80 countries, the ISO /IEC 27001:2005 ISMS provides a management framework for continuing conformance to information security systems.

****So dot the Is and cross the Ts when looking into SaaS vendors, but don’t shy away from this delivery model, it could work for you.

**By Daniel Liggett**

***This week, our ‘Lender Spotlight’ is on the Savings Institute Bank & Trust Company (SIBT) of Willimantic, CT. This is the second installment in our series where we share stories from actual lenders about how they selected and implemented technology initiatives. When the $950 million SIBT began their search for new loan origination technology, they set out to create a list of the capabilities that were essential in meeting their future lending requirements. One was to have the LOS and the accompanying data reside on servers within the bank’s existing internal IT infrastructure. The second was to process both mortgage and consumer loans from a single system. The remaining requirements on the list were derived from experiences with past systems. These included flexibility, customization, and vendor integrity.

****SIBT’s year-long search culminated in the selection of PowerLender, a business-rules-based LOS, with Specialized Data Systems (SDS) of East Haven, CT. providing the implementation and configuration services. SDS and SIBT designed an implementation plan and refined PowerLender to meet the bank’s specific way of doing business.

****We understood our workflow requirements. We have a mix including Conventional, FHA, 203K, Connecticut Housing products, EquityBuilder products and Rural Development products. Our operation is like many banks in the region and SDS had a firm grasp of our business and helped us implement it into PowerLender in a rapid fashion. It didn’t take long for us to discover that with PowerLender, anything we needed we could do.

****The project began in January and we went live with PowerLender in June. PowerLender helped streamline our workflow by providing third-party integrations with Desktop Underwriter, mortgage insurance providers and credit bureaus. The ability to attach documentation to a loan record reduced the resources we devoted to compiling and tracking these items.

****Our point-of-sale operations include both face-to-face and online using LoanQuoter by DataVision. Our plan is to take advantage of PowerLender’s web services which allow seamless, automatic transfer of loan data between the consumer-facing portal and the LOS. Thus data entered by the consumer goes directly into PowerLender and loan-status updates are available on the web.

****Aside from the large number of technical and business requirements that PowerLender was able to handle, it’s still a user-friendly system. I manage 16 people who touch PowerLender on a daily basis, including originators, processors, underwriters, closers and post closers. They are all involved in the process, and their input is extremely important.

****We achieved our lending technology requirements of an in-house system that could handle multiple lending products including consumer, and deliver integrations to streamline the point-of-sale.

****Technology that provides flexibility, adaptability and ease of use is a key to a long-lasting LOS. Having a vendor who understands our business as well as theirs is just as important to achieving success. And when you achieve a comfort level among all stakeholders, it allows for rapid acceptability and real achievement.

****The next ‘Lender Spotlight’ shines on an innovative lender who used technology to compete on a higher level.

**By Joseph Badalamenti**

***In response to heightened levels of foreclosures, leading field service providers are strengthening their service offerings along multiple fronts. Though many are seeing increases in base business, long-term success will increasingly favor those with the infrastructure, innovative technology and broad-base expertise needed to deliver comprehensive, end-to-end solutions.

****How Technology is Helping

****Technology is playing a key role as servicers look to their field service partners for more productive and cost-effective approaches to default management. Solutions such as those below are finding traction with servicers of all sizes, nationwide.

****HUD P260 Data Entry – Mandated use of the HUD P260 portal – particularly in terms of data preparation and entry – has introduced a whole new set of administrative and procedural challenges. Missteps can be costly: Compliance failure can mean interest penalties for every day a property exceeds conveyance deadlines. Or costs for work the servicer discovers too late aren’t reimbursable under HUD regulations.

****To address this challenge, some field service companies now include data preparation, formatting and entry for the P260 portal as a service to their customers. Not only does this relieve client compliance worries, it saves valuable time.

****Vacant Property Registration: With today’s swelled default and REO inventories, many servicers are finding vacant property registration to be a troublesome and frustrating task.

****To help servicers respond, some service providers maintain and continually update a comprehensive vacant property ordinance database. Such a database provides a single online reference for all municipalities nationwide, so that a user can access regulations and registration rules that apply to each property, by location.

****Utilizing functionality integrated into the database, the field services provider can handle vacant property registration from start to finish, establishing rapport with municipal leaders, notifying mortgagees, filling out and submitting registration paperwork and coordinating actions needed to assure compliance.

****Integration of pre-foreclosure and REO services: Given today’s inflated default and foreclosure rates, an effective partner must be able to provide both pre-foreclosure services, such as property preservation, inspections and valuations, and REO services, such as occupied property management, pre-marketing services, marketing services, and closing and title services. For the servicer, working with a single-source for both pre-foreclosure and REO services can provide a number of important advantages leading to better overall returns on REO assets.
****Expansion of REO Services
****Field service companies must demonstrate the ability to handle both quantitative (volume) and qualitative (depth of service) market demands. Meeting this dual-track challenge requires a large, nationwide field service team: The key to rapid deployment of field resources on a neighborhood-by-neighborhood, property-by-property basis. Providers who can perform at this level are re-defining responsive REO service.
****Occupied Property Management: Leading field service companies can determine occupancy, evaluate state redemption guidelines and provide a full range of document delivery, signature execution and related borrower contact services. Qualified field service providers can also save their clients time, money and administrative headaches by assuming full REO property management responsibilities, including services such as cash-for-keys exchanges; eviction coordination; utility, property tax and insurance payments; and rental lease management, including payment pickup.
****Pre-Marketing: With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, providers offering both pre- 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 turnkey auction management or assigning a broker, as appropriate.

****Marketing: Field service providers who can offer comprehensive property marketing services are helping REO properties return maximum market value in minimum time. Qualified providers can mount complete marketing campaigns, provide detailed monthly marketing reports, and assume full responsibility for broker monitoring/evaluation.

Closing Services: Well-qualified field service 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 services and more are well within the scope of today’s best-qualified field service organizations.

****The Path Forward

****Improving and streamlining default and REO processes will remain a primary focus of servicers and their field services partners as elevated foreclosure rates continue and 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: Joseph Badalamenti (Joe Bada) got his start in the default management industry in 1967 as a HUD contractor. Now, 43 years and over 5 million inspections later, Joe has built Five Brothers into a highly successful and respected industry leader offering a full range of default management services and technology solutions. Advanced technology solutions created under his leadership the industry’s first web-based workflow management system.

**By Jeff Wirsing**

***“If we don’t change direction soon, we’ll end up where we’re going!” That quote is attributed to 97 year old comedian “Professor” Irwin Corey who bills himself as “The World’s Foremost Authority!”

****As we step back and look at the economic climate of the U.S. in 2011 those words are quite prophetic. Clearly, Professor Corey’s quote is profound in its application to current events. In retrospect we have arrived at exactly the destination we were headed for over the last decade:

****>> Failed Sub-Prime Market

****>> Failed Mortgage Companies

****>> Declining Home Values

****>> Failing Banks & Gov. Bailouts

****>> Higher Gas & Food Prices

****>> Weakened & Uncertain Economy

****>> Ballooning National Debt

****>> Soaring Unemployment

****>> Diminishing Consumer Confidence and government support

****If the mortgage industry, (and the U.S. economy), is going to thrive and survive it will be necessary to consider a dramatic change. The good news is that the mortgage industry, post meltdown, has had a tremendous opportunity. The bad news is that it has failed to seize the moment.

****Futurist, Buckminster Fuller is quoted as having said, “You never change things by fighting the existing reality. To change something, build a new model that makes the old model obsolete.”

****As a result of the mortgage meltdown, and the collapse of confidence in mortgage backed assets, a great deal of attention has been directed toward fixing the problem. We’ve seen legislative changes, regulatory changes, changes to the valuation process, changes to methods of compensation, new licensing and registration requirements and of course a tightening of underwriting guidelines. But unlike the quote from Buckminster Fuller no one has created a new model and we continue to reconfigure the same parts we’ve been working with for years. And based on my informal survey of industry professionals the collective consensus is that none of these changes has resulted in improving the mortgage industry and protecting consumers. In fact, many argue that the changes have actually hurt consumers. It’s also important to note that the “changes” have come about from outside of the mortgage origination industry (i.e. legislation and regulation) rather than solutions that are industry driven.

****So, why has so much collective interest in fixing a problem failed to produce any meaningful results, especially when it comes to increasing confidence in the quality of MBS and the ability of mortgage borrowers to meet their obligation? And why hasn’t the mortgage origination industry come together in a meaningful way to create it’s own solution? The secondary mortgage market went away and for all intents and purposes no investors (besides Fannie and Freddie) have come back into the market. It doesn’t take a rocket scientist to figure out that none of the “fixes” are having the desired result. If the cause of the meltdown was the evaporation of confidence in MBS then the solution is to regain that confidence.

****Like the saying goes, “If you continue to do what you’ve always done, you’re going to get what you’ve always gotten.” Unless the mortgage industry creates a new model it will likely repeat its mistakes in the future. I’m just getting started. Stay tuned for next month as I have a few more suggestions on how we can improve our space.

****ABOUT THE AUTHOR: Jeff Wirsing is President and Co-Founder of GreenBar America LLC. GreenBar America offers a new mortgage loan pre-qualification system that mortgage originators will use with every person in the U.S. that seeks to finance a home. The program, called GreenBar, guarantees that the mortgage decision puts the Borrower in the safest possible financial position while simultaneously improving the integrity and profitability of the mortgage industry.

**Executive Interview**

***The Mortgage Bankers Association expects to see mortgage originations fall from an estimated $1.2 trillion in 2011 to $900 billion in 2012. The drop will be driven by a significant decline in refinance originations, while purchase originations will increase only slightly. The economy will see another year of anemic growth in 2012, and then will grow somewhat faster in 2013. Refinance originations are expected to fall despite low mortgage rates as economic uncertainty lingers and fewer eligible borrowers remain. The trade association’s chief economist Jay Brinkmann, went on to say, “Regardless of which path the economy and mortgage rates take, we are predicting another tough year, with origination volumes at their lowest point since 1997. Continued slow economic growth will mean that unemployment will remain elevated through 2012, which could slow the improvement in delinquency and foreclosure volumes, meaning that in addition to lower production volumes for the industry, mortgage servicers will also continue to be under pressure.” So, what’s a lender to do? Randy Schmidt of Data-Vision says it’s time for lenders to think outside of the box and go online. Here’s his advice:

****Q: What online lending trends are happening now?

****RANDY SCHMIDT: Online lending is growing dramatically as lenders are looking to add more features to their online channel. When online lending first started, lenders used it merely as a data collection tool. Today, lenders are making their online sites more interactive. They are engaging their borrowers and giving them all of the information that they need to make an informed buying decision. They are also using their online channel to securely communicate with their customers to keep them informed during the process. As an online vendor, we are seeing more and more customers looking to implement features such as live chat, secure messaging and electronic delivery of initial disclosure documents directly to the consumer.

****Q: What is the importance of online lending as a separate channel?

****RANDY SCHMIDT: As origination volumes drop and lenders battle for prospective borrowers, they need to be where their potential borrowers are. A recent study showed that there are 51.5 million potential homebuyers born between 1979 and 1991. This group of people commonly referred to as “millennials” comprise nearly a quarter of the total US population. This represents a critical target market and virtually every member of this group can be found online. By not having an online channel, lenders are missing out on a tremendous opportunity.

****But online lending shouldn’t be thought of as solely as a separate channel, but also as an extension of your existing channels. By allowing loan officers, correspondents, third party originators and help desk personnel access to your online lending tools borrowers can receive the same up to the minute information and service levels regardless of the channel they choose. This multi-channel approach allows for a consistent borrower experience that creates customer satisfaction and builds loyalty.

****Q: What are today’s borrowers looking for from an online application/solution?

****RANDY SCHMIDT: Members of today’s “do it yourself” generation, prefer to have a robust consumer portal available to them 24 hours a day, 7 days a week, 365 days a year. This portal should contain all of the tools necessary to allow the borrower to gather all of the information they need to make a decision and then allow them to execute on that decision. Once that decision has been made, a consumer portal should allow the borrower to stay informed throughout the entire process.

****A robust consumer portal should contain the following tools:

****>> Up to date product and rate information

****>> A variety of mortgage calculators

****>> A pre-qualification process

****>> On demand live chat

****>> An easy to use and secure application process

****>> Instant approval capabilities

****>> A secure message center between the Loan Officer and the Borrower

****>> Electronic delivery of initial disclosures and other documents

****>> Up to date loan status information

****Q: In today’s heavily regulated environment, what’s the case for electronic disclosures?

****RANDY SCHMIDT: The use of electronic delivery for disclosures not only helps cut delivery costs, but can also create a more compliant process.  Disclosures have unique timing requirements to them. For instance, lenders are required to provide truth-in-lending disclosures within 3 business days after receiving a mortgage loan application and before any fees are collected other than a reasonable credit check fee. Also if the interest rate changes significantly, the lender must provide revised disclosures 3 business days prior to closing. Electronic delivery of disclosures not only allows you to cut critical time out of the process, but allows you to meet these requirements as well.

****Another benefit of electronic disclosures is that each step in the delivery is date and time stamped providing a complete audit trail of the entire disclosure process.

****Q: In today’s heavily regulated environment, what’s the case for electronic delivery of closing docs?

****RANDY SCHMIDT: It is all about security, confidentiality and cost reduction. Lenders can no longer afford to manually print documents, assemble them and use an overnight courier to deliver them. Emailing documents isn’t a viable option due to security concerns. Using an electronic document delivery provider allows you send documents economically while still maintaining security.

****Also if a closing agent discovers an error in the documents while at the closing table, electronic delivery can get new copies to them instantly without having to reschedule the closing.

****Q: Data security is critical. What do lenders need to know around security when it comes to looking for an online lending and electronic delivery solution?

****RANDY SCHMIDT: Lenders need to do their due diligence when selecting an online vendor. The best place to start is with the vendors SAS 70 or SSAE 16. These documents describe the controls and procedures that a vendor has implemented to enhance data security.

****Areas that should be reviewed include:

****>> Organization and Administration

****>> Computer Operations and Infrastructure

****>> Physical Security

****>> Logical Security

****>> Business Continuity and Disaster Recovery

****>> Software Implementation, Maintenance and Documentation

****The most important thing that lenders need to know is that just because an organization has a SAS 70 or SSAE16 it does not automatically assure that the vendors controls and procedures meet the lenders standards for security. Each lender needs to do their own risk assessment to determine which controls and procedures are important to them. A vendor review then needs to be performed to make sure that the vendor has all of those controls and procedures in place. A SAS 70 or SSAE 16 should not be used as a replacement for due diligence, but rather as a tool to make due diligence faster and easier.

****Q: As mentioned, there’s a new standard replacing SAS 70 called SSAE 16. What’s the impact of this new standard on lenders? What do they need to know?

****RANDY SCHMIDT: From a lenders perspective, the SSAE 16 and the SAS 70 serve the same purpose. Both reports describe the effectiveness of the data security controls used by a service organization and will be reported in similar formats. One of the biggest differences is that the SSAE 16 will contain an expanded narrative which describes the “system” instead of just the controls being used. The SSAE 16 also requires management to identify the risks that threaten the achievement of their control objectives and also evaluate whether the controls used adequately address those risks.

****Q: Can online lending level the playing field with originations expected to decline further? If so, explain how.

****RANDY SCHMIDT: As originations decline, all lenders will be competing for a smaller group of borrowers. The best way to compete, regardless of the channel, can be summed up in two words: Customer Service. Knowing your target customer, and giving them the information they need while delivering an experience that they feel comfortable with, is the primary way to acquire and retain customers.

****That being said, it seems logical that the best way to deliver that ultimate borrower experience is online. We all know that online experiences are becoming a normal part of our daily lives. Whether we are reading our email, checking our stock portfolio, perusing the latest headlines, buying items online, checking our bank balance, keeping up with our favorite sports team or just visiting one of the many social network sites most of us are connected to the internet in one form or another multiple times every day. With the ubiquity of the internet consumers are now connecting at home, in the office, on the road and through their mobile devices. Meet them on their terms and you can maintain your competitive edge.

****Q: With the proliferation of mobile technology, how will that impact online lending going forward?

****RANDY SCHMIDT: As mobile technology grows, so will online lending. Tools and features will be enhanced with the mobile platform in mind. Although consumers probably won’t fill out a complete mortgage application on their cell phone, they will still be looking for you to provide services to them via mobile technology. Customized rate quotes, pre-qualifications, secure messaging and up to date loan status are just some of the features that lend themselves nicely to a mobile platform.

****Q: What impact will what comes out of the Consumer Finance Protection bureau have on online lending?

****RANDY SCHMIDT: Most of the initial changes will affect the entire mortgage industry and not just online lending. However, as change comes more rapidly, more lenders will look to online vendors to ensure compliance with the new rules. Most online vendors employ a Software as a Service (SaaS) model, where the vendor manages the implementation and delivery of new releases. This allows lenders to focus on their core business without worrying whether their software is in compliance.

****Q: What other rules and regulations will impact online lending in 2012?

****RANDY SCHMIDT: The first change will be the new Multi-Factor authentication rules that will take effect in January 2012. In 2005 the FFIEC issued guidance entitled Authentication in an Internet Banking Environment. This document stated that institutions should use effective methods to authenticate customers and protect sensitive customer information. The solution that many vendors implemented was to initially authenticate a borrower and then set a cookie on their machine to be used to help identify and authenticate them on future visits. If a borrower tried to connect from a machine without the cookie, the system would re-authenticate them using a series of backup challenge questions. In June of 2011, the FFIEC issued a supplement to their guidance stating that institutions should no longer consider simple device identification or basic challenge questions to be an effective risk mitigation technique.

****So during the last 6 months, vendors have been busy coming up with ever more sophisticated ways of authenticating and re-authenticating borrowers. Techniques such as more sophisticated one-time cookies containing a digital fingerprint coupled with less obvious “out of wallet” questions have been employed. Out of band authentication is also being used by some vendors to re-authenticate borrowers. It is important to check with your vendor as to their authentication techniques as financial institutions will be expected to comply with the new guidance by January 1, 2012.

****Q: What can we expect from Data-Vision as a company going forward?

****RANDY SCHMIDT: Data-Vision will continue to provide our clients with compliant leading edge products, built on scalable platforms and backed by unequaled service. Both our LoanQuoter point of sale system and our RemoteDocs document delivery system are scheduled for new releases during the first 6 months of 2012. We’re looking forward to helping lenders take full advantage of online lending in 2012 and beyond.

****INDUSTRY PREDICTIONS

****Randy Schmidt thinks:

****First, I think you will see a major shift toward a greater use of the internet for mortgage lending. As LOS systems release new versions, many of them will move from their current client/server architecture to an internet based Software as a Service platform. This environment will make it easier for both the lender and the service provider to maintain and update their products.

****Second, I see lenders putting more emphasis on customer communications. Consumer portals allowing borrowers to easily interact and communicate with their lenders will become more popular. Electronic document exchange and two way secure messaging will be added to most lenders websites.

****And lastly, I see mobile technology changing the way that both consumers and lenders approach the home buying process. There will be new products and services developed to make mortgage information instantly available to consumers wherever they are.

****INSIDER PROFILE

****Randy Schmidt is President of Data-Vision, Inc. and is responsible for overall operation and strategic planning for the company. Randy became involved in the IT side of mortgage banking almost 30 years ago and has been involved in numerous projects on both the origination and servicing side of the business. In 1993, Randy co-founded Data-Vision, Inc., in Mishawaka, Indiana as a Web design company. He then combined his previous mortgage experience with Internet knowledge to bring the speed, power and availability of the internet to the mortgage industry.

**By Martin Williams**

***Many people in the mortgage industry today are hearing and reading about cloud technology without having a clear understanding of what it is and what it means for their business. All they know is that “the cloud” is where they need to be.

****Those of us with some experience on this topic understand that the only thing new about cloud computing is the term itself. The Internet, in fact, is itself a “cloud.” So is the local power company. And yet, cloud computing does describe a very real thing happening – albeit slowly – in today’s mortgage industry. We have the potential now for anyone in any organization to be able to access all the tools and data they need, at any time, from anywhere, on nearly any device, without the concerns of owning, updating, maintaining and supporting expensive software applications. This is, in essence, what happens when you move your business into the cloud. I know, because I’ve seen it firsthand.

****Corporate Culture

****When I started my own mortgage company back in 1995, Millennia Mortgage, I knew technology would play a major role. The predominant business model at the time was staffed independent loan agents in a regional office, sourcing business on their own. Our focus was on cash-out financing via 1^st and 2^nd TD loans. These types of loans were highly valued by the customer, easy to explain, and could be processed with relative ease. By deploying a marketing campaign consisting largely of direct mail and radio ads, we recommissioned our sales agents under a call center structure, fielding incoming phone calls from across the country, qualifying borrowers over the phone, and processing by mail and fax. We had effectively adopted the model of “loans-by-phone” across state lines.

****We first looked toward employing customer management and origination tools. Of course, there were plenty of mortgage software offerings and loan origination software systems to choose from, but none of them focused on the contact management or customer relationship management (mortgage CRM software) component of the sale. At the time, even generic stand-alone CRM tools were in short supply in the industry. There was ACT!, which many of our competitors were using, but we knew its limitations first hand, especially when it came to integration with loan origination software.

****That’s when we began taking steps to develop our own loan origination software, which later would become our VCO Lend product. Initially, however, it began as a mortgage contact management application. Millennia was soon doing a large amount of volume with an average application pull-through ratio above 20 percent, and we needed a system that could manage all those contacts. Equipped with a college education in computer science, I started programming.  I actually created our contact management software myself in Microsoft Access, as well as creating many of its design elements. (After a year and a half of this, however, I started hiring contractors – they were simply better than I!)

****While we were developing our contact management solution, we began encountering another problem with the loan origination software we were using at the time. After we ran a borrower’s credit, there was no way to integrate the results into the loan origination software – someone actually had to type in all those credit card balances. By 1997 we had had enough, so we built a software module that allowed our staff to order credit and have the results integrated with our loan origination software. Streamlining this single task measurably improved our workflow, and helped define a company culture of innovation. Throughout our history, we embraced technology as a means to refine workflows, increase turn-times, create transparency, enhance customer relations, manage costs and ultimately yield a much better bottom-line.

****Our next step was developing marketing campaign management and lead distribution tools. Pretty soon we had assembled an in-house software development team and were building custom loan origination software straight from the ground up. Around the same time, Millennia Mortgage moved to mortgage banking, so we began building tools within the loan origination software that would enable us to effectively manage all aspects of banking. Gradually we added business intelligence, workflow management, and business rules that governed security and data integration. A further step was integrating our system with third-party vendors, which created additional efficiency and time savings.

****Piece by piece, we were creating from scratch all the major components of the mortgage production chain. At every step along this development path, we knocked down one inefficient task after another, shaving precious time off the mortgage production process while creating company-wide transparency

****Enter the Cloud

****By 2003, Millennia had grown from a mere startup to a robust company employing over 125 employees producing 400 loans a month. It was around this time where we began our migration to a virtual, paperless office engaging Citrix, the leader in desktop virtualization. Citrix allows businesses to virtualize both the server structure and the user experience. By centralizing our hardware and software in a securely protected co-location facility, we broke free of the physical constraints of traditional IT infrastructures and office space. Empowered with our proprietary electronic document management system, our staff could now login remotely from home or a laptop, have the identical user experience they’d expect while sitting at their office desk, but also have a client’s complete paperless loan file callable from directly within the loan origination software. We had enabled any employee with an Internet connection and a web browser to perform their job from any point on the globe. By all accounts, Millennia was operating in “the cloud,” so to speak.

****This was right before the Orange County, California mortgage industry began experiencing explosive growth. The recession of 2001-2002 had set everyone back a bit, but by 2004 things in the mortgage business really started heating up. The competition for quality operations staff was extremely intense; the best were demanding up to $20,000 signing bonuses. By moving Millennia to a paperless, virtual environment, we didn’t have to rely solely on the Orange County labor market. Our operations were now cloud-based and no longer tethered to a geographic location, which meant we could hire anywhere. Aided by cost-of-living differences, we could bring on high-quality personnel living in places like Minnesota at a fraction of the price.

****At the same time, our evolving technology platform allowed us to parse out our loan workflow with such refinement that we were able to contract out more and more work. While our competitors muddled with conventional linear workflows that were labor intensive and high cost, we were able to automatically assign tasks commensurate with pay grade, thereby maximizing the utility of highly compensated staff. For instance, business rules and queuing logic within our loan origination software system ensured processing assistants received the bulk of the heavy lifting, while processors and underwriters could focus on work more in line with their level of expertise. Underwriters and assistants were hired on a contract basis, and paid on a per task basis, to engage at times of peak production, effectively responding to production backlogs and keeping turn-times inside of 24 hours. Our self-assigning queuing technology would email contractors, enticing them with variable bonus incentives that were tracked, reported upon and tallied for payroll accounting.

****In a 24/7 environment, contractors could work on their own time and didn’t have to quit their day jobs – they could work at night from home. By staffing with full time employees to meet production lows, and engaging contractors to manage the surges, we achieved a high level of staff-production utility. Everything – all the data, documents and software – stayed on our system. The underwriters couldn’t download anything or print anything. They didn’t need to. When the underwriters’ analysis came back in the morning, everything was stipped out, and the checklists and findings were handled by our processors and assistants. Everything happened electronically.

****Meanwhile, each Millennia ops staff member had his or her own pipeline management screen within the loan origination software system. At a glance they could quickly see what needed to be done and done first, whether it was requesting a demand, ordering an appraisal, opening up title and escrow, signing off on a satisfied condition, or anything else. At the same time, our assistants, configured into three levels, would track down the multitude of conditions on a file, including making borrower contact for outstanding key documents, a benefit the sales agents truly appreciated. Our development of task and file queuing, empowered with paperless, allowed us to move away from the linear structure of file management so multiple people were able to work on the same file at the same time. This created even greater staff efficiencies, because there was less waiting around for something else to happen before someone could get to work on the file.

****In 2004 we embarked on the last key component on the underwriting side: an automated underwriting and pricing engine. Fortunately, one of our investors, GMAC, granted us a large sum of money to invest in this technology. We interviewed all the prevalent vendors at the time, but rather than lease their technology, we opted to purchase the code and further engage them to build our first generation AUS just the way we wanted it, completely integrated with our proprietary loan origination software.

****With exceptional ease, we could take a borrower profile and come back with all the different loan programs that the customer qualified for, stacked, conditionally approved and priced side by side. Once a loan product was selected, it was downloaded into the loan origination software along with the loan terms, end price, and a conditional loan approval. Callbacks to the AUS were facilitated at the click of a button, enabling underwriters to routinely validate approvals and pricing in the midst of guideline and pricing changes. Approval certs were produced and loaded directly into the paperless loan file, while automated AU integrations for certification were maintained with key industry investors.

****What were the results of implementing a virtual “cloud?” These innovations, over the course of an 18-month development and implementation period, ultimately shortened the loan life cycle by 40 percent, reduced the costs of operations staff by 35 percent, doubled loan volume, and improved profitability as a function of basis points by 33 percent. Loan agents were thrilled with turn-times and accountability, customers were happy, underwriters were satisfied with controls, processors were funding over 100 loans per month, managers could lead, and everyone was making more money.

****By 2005, 60 percent of Millennia’s operations staff were working remotely from home, plus 20 percent of our sales force. We had grown to doing business in nearly every state and had a fully-integrated advanced call center telephony solution. We were one of the first companies to develop electronic loan delivery to secondary market investors. And from all the evidence we could gather, Millennia Mortgage had become the first end-to-end paperless mortgage banking operation in the industry. While we didn’t call it that at the time, without our “cloud” technology, none of this would have been possible.

****By the time Millennia shuttered its lending operations in 2007 – an event tied directly to market forces – the company’s staff of 250 people were producing upwards of 800 retail loans a month. Regardless of Millennia’s fate, I knew, as did many of my colleagues, that we had something special with our technology. Acris Paperless Solutions started out in 2005 as simply an electronic document management company, and in 2011 we changed the name to Acris Technology, incorporated all of Millennia’s technology, and launched Mortgage VCO, a comprehensive and affordable suite of cloud-based, mortgage office management products available to lenders nationwide. It includes the mortgage loan origination software system we built from scratch, VCO Lend, as well as a desktop virtualization solution including MS Windows, MS Office, an integrated IP Telephony solution, paperless document management software and electronic signatures.

****So while I’m no longer running my own mortgage company, I’m passionate about helping other lenders realize the full benefits of cloud technology – a virtual, automated, paperless mortgage office, without any of the development headaches we went through. You might imagine that when I talk to these lenders, one of most compelling things I can say is that I’ve lived in the cloud myself. And let me tell you, the view from up there is amazing.

****ABOUT THE AUTHOR: Martin Williams is CEO of Laguna Hills, California-based Acris Technology, the company behind Mortgage VCO, a full suite of cloud-based software applications and business support resources for the mortgage industry.

**By Cathy Blaszyk**

***The industry is tasked with improving disclosures to consumers to ensure they have all information needed to make informed decisions. The key is to prevent further complicating the process.

****Let’s examine the decision to combine the information represented on the mortgage disclosures. Under the Dodd-Frank Act, the newly established Consumer Financial Protection Bureau (CFPB) is in charge of this task and has dubbed it the ‘Know Before You Owe’ project.

****During the first phase of the project, the bureau made an attempt at simplifying home loan disclosures by combining the Good Faith Estimate (GFE) and Truth in Lending Act (TILA) statement into one mortgage disclosure form. Lenders are required to provide borrowers these forms, which include loan estimates, within three days after application.

****After receiving input from 24,000 members of the public, mortgage industry and market experts in the first phase of the project, in early November the CFPB released two prototypes of Phase 2 the new closing form, which combines the HUD-1 Settlement Statement and the TILA disclosure forms. The bureau will continue to solicit feedback from the public until December 21 on the new prototypes, which are called Ironwood and Hornbeam. CFPB also plans to consolidate other new and current federal mortgage disclosure requirements, hoping to eliminate 50 percent of the paperwork involved in the process.

****As a refresher, let’s put these forms in perspective. The HUD-1 is required under Section 4 of RESPA and 24 CFR part 3500 (Regulation X) of the HUD’s regulations. It is a statement of the actual charges and adjustments paid by the borrower and seller related to a mortgage settlement. Section 4 requires that a HUD-1 be prepared and provided to the borrower at or before closing. The TILA disclosures are required under the statute and under 12 CFR 226, the Federal Reserve Board’s Regulation Z.

****Before 2009-2010 RESPA reform, the GFE form consisted of one page and included itemized principle, interest, taxes and insurance (PITI) and cash to close. The one page form was considered very straightforward and required the borrower to sign and acknowledge receipt of it. The revised form was increased to three-pages and designed to simplify the information presented to consumers by adding the block format and removing the signature line. At the time, the vision from HUD officials was that the borrower would compare this standard three-page form from multiple lenders to make an informed decision. The decision to omit the signature line from the document was to remove a sense of obligation from the borrower to the lender for receipt of the GFE. Some originators have indicated this has translated into consumers not feeling obligated to read the information on the form since they did not have to sign it. Another precipitant behind the modifications of 2009-2010, which also were designed to help the consumer, was to not require them to provide as much financial information before making a decision about a lender. The reasoning was that after providing financial documentation once, consumers would not want to repeat the process; therefore, they would remain with the lender and be less likely to shop for better pricing.

****To accompany the Phase 2 feedback received from the public, CFPB is conducting qualitative testing with the prototypes in cities across the country. The process includes conversations with consumers, lenders, brokers and other mortgage industry professionals. The CFPB expects to perform four rounds of testing and revisions finishing in February 2012, and then plans to issue draft forms for additional public comment as part of the notice and comment rulemaking procedure in July 2012.

****In a November statement release from Raj Date, special advisor to the secretary of the treasury on the CFPB, he said, “The second phase of our ‘Know Before You Owe’ mortgage project is aimed at simplifying the federal disclosure consumers have to tackle at the closing table. Our goal is to help make the costs and risks clear at all stages of the mortgage process – from shopping for a mortgage to signing on the dotted line.”

****The process has proven more complicated than anticipated by the industry and the bureau alike. While on the surface combining the forms seems like a sound idea to provide consumers a more clear picture of possible fees, there are still several areas of concern.

****First, let’s examine some of the issues the newly proposed form does address.

****Consumer Signature. The revised GFE/TILA prototypes from Phase 1 of the project still omit a signature line for the consumer. As mentioned earlier, the current version of the 2010 GFE does not have a signature line and industry feedback indicated many consumers are less attuned to the page. The combined HUD-1/TILA does have a signature line to confirm that the borrower received the document. A signature line is not included on the current HUD-1.

****Summary of Loan. This information is on the first page of the proposed five or six page settlement disclosure document. Having a summary of the loan front and center gives consumers a clear view of the terms of the loan, projected payments and closing costs. The subsequent pages offer more detail around those specific areas.

****There are still some areas of these revised forms that concern lenders and service providers. These are a few areas that will continue to receive some attention from the board.

****Important dates. Unlike the previous GFE disclosure form, the revised, combined GFE/TILA form only offers how long the estimate is valid. The form does not include a section that informs the consumer of when the rate and fees expire nor does it include information on the number of days after a consumer locks the interest rate before they must go to settlement to receive that rate. If it is a floating loan, the form does not indicate how many days before settlement they must lock the interest rate. This information is imperative to prevent misunderstandings regarding the validity of the form as well as any possible legal complications.

****Timing of issuance. RESPA and TILA currently have different timing for the issuances of the individual forms. By combining these forms, the CFPB will need to determine when and how the new form should be sent to potential borrowers. Typically the HUD-1 must be available the day before closing and the TILA form is supposed to be issued three days prior to closing. As a note, the CFPB received comments on this area of concern from the industry; however, the bureau did not incorporate any proposed resolutions.

****Buyer vs. lender selected section. With the new RESPA changes in 2010 came the concept of buyer vs. lender selected real estate service providers. Consumers were encouraged to shop and compare third-party charges for services from title agents, closing attorneys and pest inspectors for example. The HUD-1 includes the real estate service providers who ultimately perform the services. If these providers were not on the lender’s initial Service Provider List provided at time of GFE disclosure, then the providers were considered borrower selected and placed in the category “Charges That Can Change” on page 3 of the current HUD-1. Currently, in this category the lender is not held to the 10 percent tolerance. The buyer vs. lender selected section has been completely removed from page 4 of the proposed “Hornbeam” and “Ironwood” forms (see below). This puts more risk on lenders, who now appear to be held accountable for third-party providers fees despite the fact they may not normally work with the provider nor be familiar with their fee schedules.

****Service provider list. Another important feature not addressed on the Phase 1 combined GFE/TILA form is a detailed list of service providers from which consumers can select. A list should be included that gives consumers the opportunity to shop for and select service providers for the loan origination process. It remains to be seen if the service provider list will still be mandated.

****Tolerance violations. With the removal of the “Charges That Can Change” category, it appears lenders will be held to tolerance violations related to fees whether it was borrower selected or realtor directed.  Market reality is showing that many investors purchasing mortgage loans have required all title and settlement be held to the 10 percent tolerance regardless if it was borrower selected. As a result, lenders will have to rely on technology to get accurate fees especially as it relates to purchase transactions with realtor directed providers. It remains unclear if this will include the current Block 6 items as it relates to pest and other inspection reports. Transfer tax charges appear to remain at a zero tolerance and recording fees remain held to 10 percent tolerance.

****The CFPB is still seeking input from the public regarding their proposed changes to the forms. As industry professionals, we need to consider whether it is possible for us to clearly explain the forms to consumers. If not, now is the time to share our concerns with the CFPB. Lenders must express the importance of making changes that provide the information needed by consumers while addressing the challenges of implementations on the part of the industry. For example, lenders have to work with document and loan origination system providers to ensure the changes are reflected in their internal processes. We must consider how reasonable it is to expect providers to keep up with the form changes and modify their systems in a timely enough fashion to prevent violations.

****To borrow from the real estate industry on conveying the importance of location when it comes to selecting a home, when it comes to directing what will be in the final disclosure forms crafted by the CFPB and how they are presented to consumers, I encourage you all to: comment, comment, comment.

****ABOUT THE AUTHOR: Cathy Blaszyk is vice president of lender services for ClosingCorp, an independent real estate data and technology company that develops online data services for mortgage lenders, real estate professionals and consumers.

**By Barbara Perino and Rebecca Walzak**

***In today’s world of mortgage lending, one must find a way to survive. While some lenders dig in and wait for the worst to pass, with the regulations to be issued and the lawsuits to be settled, there are others that look forward to where the industry could or should be in the years ahead. These folks are often called innovators or entrepreneurs; many times being called both within a single conversation. But is an innovator also an entrepreneur? Can you be one but not the other? And which of these will provide the industry with a critical “shot in the arm” to get us over the malaise that festers within our midst today?

****To find the answer to these questions, we talked to a number of entrepreneurs from the industry who have been successful in the past in bringing new ideas to fruition so that we could get their thoughts on the differences and similarities of being an entrepreneur and/or an innovator and how they differ if at all.

****Among those we spoke with was Mr. Terry Wakefield, President and CEO of The Wakefield Company and a widely recognized entrepreneur in the mortgage lending industry. Among Mr. Wakefield’s entrepreneurial achievements was participation in the issuance of the first ever RMBS in 1982. He was also the individual responsible for the creation of a single-site mortgage lending platform that provided access to mortgage financing for borrowers across the entire country. This platform eventually became Prudential Home Mortgage and restructured the basic business model for the industry.

****A second interview was held with Dr. Michael Sklarz, President of Collateral Analytics and developer of the first automated valuation model for property evaluations. Dr. Sklarz has more than 25 years of professional experience in real estate research, analysis and real estate technology product development in the United States. During his tenure as the Director of Research at Prudential Locations, Inc., he helped pioneer the development of new analytic tools and databases to track and forecast the U.S. real estate market.

**** “Logic will take you from A to B. Imagination with take you everywhere” – Albert Einstein

****When asked about the difference between innovators and entrepreneurs both individuals agreed that the world is full of people with new ideas, but an entrepreneur has a” passion” about it and is willing to take the risk to turn that idea into a market reality. For Dr Sklarz it “represents somewhat of a combination of being obsessed about something and, as the same time, very much enjoying doing it.” However, passion is not enough. An entrepreneur must also have the ability to amass the resources to turn that innovative thought into a business entity and this is what separates the innovators from the entrepreneurs. Because the entrepreneur is undertaking the tasks necessary to commoditize their idea and make it available for everyone’s use, they must recognize that their effort introduces some essential components that are necessary to make it happen.

****The first of these components is of course raising capital. Without the financial resources to develop the idea into a marketable product, there can be no business. While many will put their own money into the project, every entrepreneur knows that finding these resources is key. It is not uncommon to find financial support more readily available if you have succeeded previously. One member of a small angel fund here in South Florida stated it very simply when she said “we know that if you have done this before and succeeded we have a much better chance of success again; and that’s what we expect.” Of course an entrepreneur must recognize that their investors and/or lenders are taking a big risk by supporting the development of a new idea. And that willingness to accept risk; especially the risk of failure and financial loss is one of the distinguishing benchmarks between the innovator and the entrepreneur. When discussing funding for these endeavors, Mr. Wakefield commented that “many supporters of entrepreneurs, lend based on your willingness to assume risk and accept that there will be risk associated with the endeavor.”

****Another source of funding may be found within an entrepreneur’s current place of business. Intrapreneurs are found within an existing company and are defined by Webster’s dictionary as “company executives who develop new enterprises within the company.” For these individuals, funding may not be the struggle that shows up for independent entrepreneurs but the risks are just as great or greater. Mr. Wakefield noted that in his entrepreneurial drive to initiate a new lending platform, there were many within the organization that were intrapreneurs and were able to grasp the concept and execute the requirements to make it happen.

****Of course, risk is one of the biggest factors in developing entrepreneurial ideas. Without a doubt, those taking on these opportunities must do so with the knowledge that the idea may fail or that risks they never imagined will play havoc on their opportunity. Even if the product is initially successful, external factors may ultimately decide the success or failure. However true entrepreneurs are willing to invest in their ideas and take risks with their own funds to see something they believe, become a reality.

****There are of course other factors that contribute to the success and/or failure of an entrepreneurial adventure. Whatever ideas and/or focus of your venture it requires that entrepreneurs have a fairly deep knowledge about the subject matter. Mr. Wakefield for instance, spent 10 years learning about the mortgage business from top to bottom, origination to servicing, and it was this experience and knowledge that he drew on to build a new origination platform. Dr Sklarz echoed this as well as he noted that the mortgage business is very complex and without an understanding of what we do, how we do it and how the data we generate is used, the chance of success is minimized.

****In addition to the idea, capital, knowledge and the willingness to accept risk, an entrepreneur must have the ability to execute against a plan. Despite the cartoons and sitcoms that show a bit of thought and effort before the idea “auto-magically” becomes a success, the reality is that it requires a lot of hard work, persistence and the ability to bounce back from any set-backs suffered. Without the passion for the idea and the optimism to overcome the problems that are sure to arise, the likelihood of reaching your goal is diminished.

****“Business opportunities are like buses, there’s always another one coming.” – Richard Branson

****And one other factor must be considered: luck. Any entrepreneur needs to find just the right idea at just the right time for the innovative idea to be able to take root and grow. Bringing great ideas to the market at the wrong time can and likely will cause them to fail. Another factor that can’t be controlled is the external issues at play. Mr. Wakefield, when commenting on one of his initiatives, stated that if the industry does not understand or is focused away from your idea, it is likely that influencers that see the idea as a threat can be a determining factor in whether or not you succeed. As he stated about one of his less successful entrepreneurial initiatives, “the loan officers saw this development as depriving them of their commissions, so it had to go.” The same problem has surfaced numerous times in the past. Connie Wilson, the entrepreneur who developed the idea for automating fraud analysis, also ran into this problem as the industry was very slow in accepting the idea that fraud was a problem in mortgage lending. This hesitation to accept new ideas is not unique to this industry because change is difficult. But innovative ideas such as automating the QC process and scoring a lender’s origination and/or servicing process are ideas that will boost the willingness for private investors to come back into the market and so must be accepted and implemented.

****There is no doubt that the entrepreneurial focus we have discussed in this article have developed into significant advances for the industry. The individuals involved were fortunate enough to have had either financial assistance or were able to develop ideas slowly enough to build a financial base from which they could move forward. But where are the opportunities for capital investments if those funds are not available?

****There are other options to look for when trying to find investments:

****Take the easiest route first- Many times we forget about the people that are most familiar to us; Friends and Family. Most Angel Investors or Venture Capitalists will suggest going to friends and family for needed funds before asking an angel investor for help, especially first time entrepreneurs. Depending on the amount of funds needed, these individuals may be willing to contribute towards your dream as an investment rather than putting it a hedge fund or other savings plan. However, you should make sure that they are aware of all the risks associated with the business to avoid hard feelings if things don’t work out as planned.

****Finding common interests- If you find that you must turn to outside sources for funding, it is important to realize that all funds and venture capitalists are not the same. Just like any other business, they typically have business areas that are of interest to them. A fund may be technology focused and looking for new ideas and start-ups in that arena. Others may be focused on just women-owned businesses or particular geographical areas. Look for funds that have an interest in your business focus.

****Leveraging information- Today there are numerous ways to make contact with angel funds and/or venture capitalists. If your business is a local company that will bring jobs and tax revenue to the community, a good place to start is by contacting local business organizations. They will most likely have someone you can contact or give you a reference for individuals that invest in start-ups. Today there are also investment clubs or groups in many cities around the country. The individuals who attend these club meetings are typically interested in identifying as many different opportunities as they can and then following up if they have any interest.

****Your local banker can also be a source of investment opportunities, particularly if your bank offers “wealth management” services. Many times employees will be knowledgeable about entities that you can contact or will give you the name of someone to call. Keep in mind that many of these local organizations have limitations on the size of their investment so you may want to ask about that before getting too involved.

****Another source of information is the internet. The world-wide web has provided every potential business owner with the opportunity to find investors around the world. You can search on “venture capitalists” or “investment clubs” or even “angel investors” to find those that are actively seeking opportunities. When contacted they will typically screen you to determine if your business is of interest to them before asking about the details. If there is interest they may require you to travel to them, so be prepared to spend some money finding money.

****Finally, there are organizations that focus on bringing investors and business owners together. To do this they will hold conferences where investors and those looking for investments can meet. You will have to pay for attending these types of meetings and if you want to give a presentation on your business opportunity to the entire group, there is typically an extra charge for that.

****What we don’t know however, is how many other ideas and entrepreneurs there are in the mortgage industry that could make change as significant as those mentioned above. If only there was a way for them to get the financial assistance and support they need and to believe in their idea strongly enough to do something about it.

****We do know however, that in other industries this support often comes by way of an investment fund or a senior management volunteer group or some combination of both. Other industries have these, such as funds that focus on technology or healthcare. Yet there are none for mortgage lending or even consumer lending. And, quite frankly it is not that there is no money to be invested. With the number of individuals who became wealthy during the subprime boom years of 2003-2007, there should be more than enough available and willing to fund some of the entrepreneurs that have ideas worth pursuing. Why a fund can’t be established for this very purpose by individuals who are concerned about health of the industry is a mystery. It could be organized and supported by any number of groups. In fact the MBA has done this exact thing before with the development of MERS and its support of the MISMO data standards.

****The bottom line is this; there are innovative ideas and entrepreneurs within our industry whose ideas can advance the mortgage banking platform. Our progress is dependent on finding new ways to do what we do, to do it better and in a way that is more conscious of what the borrower and investor really expect of us. We just need to find a way to make it happen.

****The vast majority of human beings dislike and even actually dread all notions with which they are not familiar… Hence it comes about that at their first appearance innovators have generally been persecuted, and always derided as fools and madmen.

****ABOUT THE AUTHOR: Barbara Perino is a Certified Professional Co-Active Coach guiding her clients who are executive leaders and their staff. Barbara has been trained through The Coach Training Institute (CTI) located in San Rafael, CA. She completed a Coaching Certification Program through CTI and the International Coaching Federation (ICF). Prior to becoming a coach, Barbara was a 16-year veteran of the residential mortgage industry in a national sales management capacity for property valuation and residential mortgage service providers.

****ABOUT THE AUTHOR: 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 having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

**By Brian Koss**

***In the book-turned-movie The Perfect Storm Sebastian Junger describes how three storms meet in the Atlantic and how different boats and captains reacted. If you were a large ship you were stuck with what you had. You were so large there was nothing that you could quickly buy off the shelf to adapt your boat, and your crew was full of specialists, not generalists, used to mastering many tasks.

****The smaller boats were an amalgamation of passion, discipline and experience. A passionate owner with the discipline and forethought would have invested in the right technology and modern equipment that would give the boat the edge to perform in all situations. This care and logic attracts wise and seasoned crews who appreciate the long term view to security and safety while achieving performance.

****If there has ever been a “Perfect Storm” in our industry we have witnessed it the last few years. A bursting bubble of values, jobs, credit and equities matched with massive government regulation have created a scenario no one could have planned for. But some have survived where others, even with seemingly greater advantages, have not.

****Mortgage Network, in Danvers MA, founded in 1988 as a broker by Robert McInnes and Al Pare, happens to have survived this Perfect Storm and looking back now you can see why. Over the formative early years Bob and Al stuck with the focus of doing what is right for the customer. Mistakes were made, and learned from; they were never forgotten and never repeated. As MNET became a lender it became apparent that building a superior technology focused around hedging, pipeline management and delivery was crucial to survive.

****In the mid to late 1990s, none of the existing technologies fit the needs of the company so MNET decided to pioneer their own. Led by CTO Carlos Sa, it was decided to start with the most acceptable modules as place holders while they began to customize the most important sections first. So Contour’s Loan Handler for LOS, Harland Financial for servicing, Commerce Velocity for credit, ICC for docs, and Microsoft Dynamics for accounting. As certain areas became more modified and customized it was determined MNET could possibly do it better and a new section was built. In today’s world, MNET has created one system that supports sales, operations, secondary and delivery through one platform. The only pieces still relied on through others are Docs with IDS, compliance with ComplianceEase, and Microsoft Dynamics.

****As a wholesale platform was added in that late 1990’s more variables were added to the mix. Different brokers with different demands along with different states (43 at the high) created challenges. As the market morphed more to Wall Street and the products pushed the envelope, controls needed to be in place to ensure that the right loans were created that protected the borrower and the investor and therefore the company. Yet there needed to be true flexibility to create new product, smoothly originate it, and pool it for market.

****Mortgage Network played in all the arenas but only at the level they felt was best for all involved. MNET originated Alternative Documentation product, but not Stated Income, as it forced the client to misrepresent and the lender to execute an untenable contract. MNET worked in B-subprime where they felt borrowers were deserving but unrepresented, but not lower credit tranches where borrowers were set up to fail. MNET avoided Option Arms but created Super Jumbo Interest Only Arms for high net worth clients who could handle the risk. Even when the GSEs were pushing Timesaver documentation programs and Level 3 subprime AU products, MNET chose not to play on those terms, but find local portfolio outlets that allowed the customers who were disenfranchised to find a lower priced safer product that required no misrepresentation or usurious terms.

****As the market approached its frothy peak, veteran leaders moved from uncomfortable models to a home they could believe in at MNET. They brought with them lessons learned in growing too fast and deeper knowledge of Government and State lending. The timing was important as Wall Street backed away from the market, MNET quickly adapted their systems and staff to become a dominant Government lender. Having a deep line-up of 20+ year veteran DE Underwriters and Closers was invaluable to efficiently respond to the market demands. Today Mortgage Network is a market leader in FHA, VA, USDA, and State Bond.

****The speed of change has been a challenge for any firm this last decade. But certain models and structures are more suited to be originator focused. The majority of large lenders are burdened with legacy systems that are built around servicing or branch referrals. The top down approach stays disconnected from the field and the changing realities of the market.  The small correspondent or large broker is focused on the tyranny of the immediate. The depth of management team scope and experience limits the ability to anticipate or react to all the changes occurring. Too many principals don’t invest in the reserves required for R&D and to anticipate shocks, and surprises. The reserves of talent and technology allow firms like MNET to make the right decisions when they arise and be ready to seize opportunities when presented.

****Another of the benefits of creating your own platform is the adaptability to the many-tiered focus on compliance. The unforgiving need to meet the never changing terms of State, Federal and Investor compliance weighs heavily on any operating system and process flow. The ability to seamlessly check against multiple compliance databases throughout a process can save untold dollars and hours.

****All of the advantages above allow a strong flexibility to find the best operational talent to serve the Loan Officer and the customer wherever they reside. ROC and MAP centers are not required as long as quality is input early and verified throughout the process. Savings of salary and cost per square foot can be obtained by placing operations where the large companies may not. Having been paperless through their GlobalDocs system (utilizing EMC technology) for the past 5+ years, MNET has been able to be creative with work flows and focus less on paper requirements and more on meeting and surpassing the customer’s expectations. Controlling the mind and the data as opposed to solely the body secures quality, efficiency, and consistency while fostering teamwork and partnerships at the branch levels.

****Using Microsoft’s Sharepoint as a platform, MNET created a central repository for the field on Administration, Products, Secondary and Marketing. Guides, updates and new releases on their wide and expanding menu give an easy view to all the possibilities at all times. The Pricing Blog allows Secondary to give timely updates and direct attention to better executions. Shared databases allow for smooth integration of multitask projects such as the transition of new branches and new employees and the organization of legal, operations, facilities, Human Resources, payroll, IT, marketing, and sales.

****The marketing department’s use of Sharepoint and their integration with Turning Point is their most popular application. Built with the goal of having the efficiency, compliance and controls of a national companies portal with the flexibility, creativity and field-driven expertise of broker portals like Loan Tool Box, MNETs marketing site is all about driving the Loan Officer Brand. The site allows for 24/7 customization of hundreds of flyers, postcards, Powerpoints, brochures, etc as well as the support of almost 40 years of Mortgage Marketing expertise for customization as needed.

****To ensure efficient implementation of marketing plans and campaigns, MNET partnered with Turning Point. On a weekly basis closing data is swept into the TP database and LOs are able to automatically include their borrowers into a 2 year 13 touch customer retention program including annual reviews, thank you’s and birthday cards. A loan officer can choose any collateral from the TP or MNET database and surgically choose a section of their database by product, zip code, ltv, etc.and mail or email them by the next day. These contacts are tracked by TP for ROI and can also be joint marketed with a partnering realtor or financial/tax representative.

****As the storm continues to swirl and the uncertainty of the mortgage business reigns, a steady experienced hand on a well-developed platform supported by quality vendor partners is crucial to not only survive but succeed. MNET has been aligned around the beliefs of always striving to find the best way to do the right thing for the customers everyday; and that has made all the difference.

****ABOUT THE AUTHOR: In September 2006, Brian Koss joined Mortgage Network, Inc. of Danvers, MA as an Executive Vice President of National Production.  Mortgage Network is a national lender with a $2B annual retail business throughout the East Coast.  Brian brings with him 24 years in the business and has personally lent as a Loan Officer over $1Billion in home loans.

**By Tony Garritano**

***I like to spotlight companies in our space that are giving back. I think community service is important. This time PROGRESS in Lending has learned that Ellie Mae has said that its volunteer, employee-run community outreach program, EllieCares, continued to grow stronger in 2011 and will be expanded to its regional offices in 2012. Here’s the scoop:

****EllieCares is run entirely by Ellie Mae employee-volunteers. A committee of Ellie Mae employees selects both local and national organizations that will be beneficiaries of the employees’ fundraising and outreach activities. Ellie Mae supports EllieCares by giving employees time off with pay for participating in these volunteer activities and matching employee-raised contributions.

****Some of EllieCares’ initiatives in the past three years have included:

****>> Fulfilling the holiday wishes of needy children through the Family Giving Tree;

****>> Hosting the annual Ellie Mae Marketplace fundraiser for the Alameda County Community Food Bank, as well as supporting food drives and volunteer workdays during the year;

****>> Building homes with Habitat for Humanity East Bay;

****>> Helping to staff the Walk for Wishes fundraiser for the Make-A-Wish Foundation, Bay Area Chapter, in California;

****>> Preparing and serving meals to homeless and needy members of the community with City Team Oakland;

****>> Painting transitional housing for families for the Family Emergency Shelter Coalition;

****>> Giving blood donations to the American Red Cross Bay Area Chapter;

****>> Creating and selling earthquake-preparedness kits to raise money for the American Red Cross Haiti Relief and Development Fund.

****“Giving back is part of our heritage and our culture. Ellie Mae team members are passionate about helping people in need and making a difference in our community,” said Sig Anderman, Chief Executive Officer of Ellie Mae. “In the past few years, our volunteers have raised thousands of dollars for worthy charities and brightened the holidays for many children in our community. I am proud of the success of EllieCares and am excited to see it do even more in 2012.”

****Kudos to Ellie Mae and others in our space that take the time to give back.

**By Joseph Badalamenti**

***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 inflated 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 large-scale 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 Marketing 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- 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 turnkey 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 ongoing detailed progress reports. Most important, 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, first, 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.

****Many Pieces, One Solution

****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 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 lenders/servicers address these and other needs critical to REO asset marketing success.

**A New Tool Debuts**

***As new rules push lenders to be more data driven, document preparation vendors are being forced to respond. We’re seeing new doc-related products and enhancements hit the market. For example, PROGRESS in Lending has learned that Document Express, Inc. (DX), has launched a new document services platform called EliteDocs. The new platform has replaced DX’s current CyberDocs online system with an enhanced and more engaging doc prep solution for its users. Utilizing the SaaS model, EliteDocs will continue to showcase DX’s array of document preparation and mortgage closing solutions consisting of Closing Documents, Initial Disclosures, High Cost/Predatory Lending Analysis and Flood Zone Determinations, while also adding additional features, expanded functionality and a streamlined look. Here’s what this new systems means for lenders:

****DX has transformed from a traditional forms library approach to producing document packages more dynamically. This empowers DX to produce accurate, fully-compliant closing documents that are based upon the parameters of the loan file, the client, the investor and any state and federal-related requirements.

****Through the forging of a partnership with web-based paperless document solutions provider eLynx, EliteDocs will contain new features and services such as eSignatures and eDelivery. The enhanced system will also interface with eLynx’s eCN (Electronic Closing Network) and eHUD, which links lenders and title companies to improve the closing workflow for lenders and simplify the HUD reconciliation process. EliteDocs also supports new loan origination system interfaces, enhanced current loan origination system interfaces to streamline data integrity, online chat support, customizable barcoding for digital document archiving, document selection tools to print and send only selected documents and more rapid package turnaround times, just to name a few.

****“It was our goal to incorporate the best features of CyberDocs into a modern, streamlined document preparation system that was technologically and functionally superior,” said Lori Johnson, President of Document Express, Inc. “I genuinely believe that EliteDocs offers our customers every possible option and advantage. It will change the way that lenders view.”

****PROGRESS in Lending hopes to keep you updated on this and all new products that we get wind of. We’ll let you know what the market response is once we can.

**Data And Analtics**

***More bad news for home prices. CoreLogic has released its November Home Price Index (HPI) report, which shows that home prices in the U.S. decreased 1.4 percent on a month-over-month basis, the fourth consecutive monthly decline. According to the CoreLogic HPI, national home prices, including distressed sales, also declined by 4.3 percent on a year-over-year basis in November 2011 compared to November 2010. Here’s what else the reports says:
****This news follows a decline of 3.7 percent in October 2011 compared to October 2010, according to CoreLogic. Excluding distressed sales, year-over-year prices declined by 0.6 percent in November 2011 compared to November 2010 and by 1.6 percent in October 2011 compared to October 2010. Distressed sales include short sales and real estate owned transactions.
****“With one month of data left to report, it appears that the healthy, non-distressed market will be very modestly down in 2011. Distressed sales continue to put downward pressure on prices, and is a factor that must be addressed in 2012 for a housing recovery to become a reality,” said Mark Fleming, chief economist for CoreLogic.
****Highlights of the report include:
****>> Including distressed sales, the five states with the highest appreciation were:  Vermont (+4.3 percent), South Carolina (+2.8 percent), District of Columbia (+2.1 percent), Nebraska (+1.9 percent) and New York (+1.7 percent).
****>> Including distressed sales, the five states with the greatest depreciation were: Nevada (-11.2 percent), Illinois (-9.7 percent), Minnesota (-7.8 percent), Georgia (-7.7 percent) and Ohio (-7.2 percent).>> Excluding distressed sales, the five states with the highest appreciation were: Maine (+4.9 percent), South Carolina (+4.9 percent), Montana (+3.8 percent), Indiana (+3.3 percent) and Louisiana (+2.4 percent).
****>> Excluding distressed sales, the five states with the greatest depreciation were: Nevada (-8.8 percent), Arizona (-4.9 percent), Minnesota (-4.7 percent), Idaho (-4.1 percent) and Georgia (-3.6 percent).
****>> Including distressed transactions, the peak-to-current change in the national HPI (from April 2006 to November 2011) was -32.8 percent.  Excluding distressed transactions, the peak-to-current change in the HPI for the same period was -23.1 percent.
****>> Of the top 100 Core Based Statistical Areas (CBSAs) measured by population, 77 are showing year-over-year declines in November, three fewer than in October.

**Trends And Analysis**

***According to a report by CoreLogic, the fraud picture is mixed. The report says the industry’s overall fraud risk appears to have stabilized. After a 20% increase in 2009, the CoreLogic Fraud Index, an indicator of the relative level of fraud risk for the mortgage industry, remained relatively flat throughout 2010 and the early part of 2011. The level of fraud in mortgage originations for 2010 is estimated at $12 billion. Early indications based on the Fraud Index show that this trend is continuing for 2011.

****Based on lower projected 2011 origination volumes and continuing flat fraud levels, CoreLogic estimates that for 2011, the mortgage industry will experience $7.4 billion in U.S. residential mortgage origination fraud. This 2011 estimate is approximately 75 percent below 2005 levels. This is due primarily to lower loan origination volumes and reduced risk tolerances evidenced by tighter lending criteria.

****Examining the data by fraud type reveals several areas of concern despite the generally flat overall Fraud Index. This analysis is made possible by a newly created Alert Risk Index system from CoreLogic through which additional risk patterns can be observed. The rate of property fraud grew more than 250 percent in the last year, while identity fraud decreased significantly. When we evaluate the movement in the individual Alert Risk Indices, additional risk patterns can be observed. For example, the primary reason for the increase in the property fraud risk index is potential fraudulent flipping and flopping of properties.

****“The overall level of fraud is down substantially,” noted Dave Johnson, vice president, product line manager of Fraud and Consortium Solutions at CoreLogic. “That is the case because origination volume is down and lending standards are tightening. Fraudsters are realizing that this is not the easiest place to go so you’re left with just what I call professional fraudsters. Also refinances are a more secure loan product and refinancing is about 75% today.

****“However, what we’re also seeing is a new mix of fraud. For example, valuation has become more artful because of the level of distressed properties,” Johnson continued. “It’s not just a visual inspection anymore because the house down the block may look the same as mine but the financial situation of that house and homeowner is very different. Fraud is never static.”

****Distressed sales remain a source of significant risk. It is estimated that unrealized recoveries on suspicious short sale transactions may be costing lenders as much as $375 million per year. Unscrupulous investors, unethical real estate agents and other fraudulent loan actors in the mortgage application process are targeting distressed borrowers and arranging same day flips through the foreclosure and short sale processes. With the volumes of distressed real estate and rate of suspicious flip transactions continuing at near-record levels, lenders are being forced to cope with more of these risky transactions where information related to other potential offers is intentionally withheld. Most of the suspicious flip transactions appear to be well executed events with investment company buyers responsible for a disproportionate percentage of the risky transactions.

**By Tony Garritano**

***People tell me a lot of things. I have a lot of close friends in this industry. And when I can I try to share it with you. Today I heard that Mortech, a mortgage technology software company specializing in solutions for mortgage bankers and secondary market teams, have identified a trend involving more mid-tier lending institutions moving into the correspondent lending channel and seeking out suitable automation to make their new divisions profitable from day one. Here’s what they are seeing:

****“With some of the nation’s largest banks exiting the correspondent lending business, there is more opportunity for lenders of all sizes, but many don’t have the technology,” said Don Kracl, president of Mortech. “Those firms that can come up to speed quickly and have an opportunity to gain significant market share in the first quarter of 2012, but they have to take action before others move in to fill the gap.”

****Mortech executives became aware of the trend when inquiries for the firm’s MarksmanLMP ticked up in the wake of Bank of America’s announcement to discontinue its correspondent channel. MarksmanLMP offers a Channel Manager product for mortgage bankers with third party origination businesses. Mortgage professionals can use the Channel Manager service to distribute correspondent pricing to their clients, deliver fully-adjusted rates, use as a locking platform and several other features. Numerous correspondent lenders already count on Mortech software for lending automation.

****“Our most recent build added new features designed for ease-of-use and seamless interactions between lenders and their correspondents,” said Kracl. “We are excited for our clients and are standing by with the technology they need to capitalize on these new opportunities.”

**By Nancy Alley**

***Every March, I look forward to a few events that let me know spring has sprung—the sun comes out; the flowers bloom; and the annual Mortgage Technology conference unveils a landscape of new technology and tools. Let’s take a minute to examine what our industry’s garden looks like today.

****What’s Blooming

****This year, as I prepare for Ft. Lauderdale, many buzzwords and acronyms are on my mind—UCDP (Uniform Collateral Data Portal), MISMO 2.6, UMDP (Uniform Mortgage Data Program), UAD (Uniform Appraisal Data) and transparency, to name a few. And, with these new appraisal data and delivery requirements, I will definitely be on the lookout for how lenders and vendors plant seeds for these initiatives.

****The great news—I’ve already heard rumblings that many vendors are supporting these new requirements. For instance, appraisal software and technology platforms are already furiously building connectivity to the UCDP and also ensuring they can output the correct XML data. As this connection is cultivated, transparency will begin to bloom.

****The Weeds

****But, while seeds are being planted to support this initiative, there are some weeds in our garden. The most noticeable to me are locked PDF documents. I blogged about this previously but then the issue seemed to go dormant; however, it has sprouted up again.

****Some documents are locked for viewing; others are locked for printing and editing. The users or systems trying to process these documents are stopped in their tracks if they don’t have the necessary passwords. On a weekly basis, I have customers frustrated over the fact that their appraisers and originators are sending them secured PDFs yet their investors are refusing to take them. Some lenders are accepting the locked PDFs and are utilizing print drivers and other conversion tactics to “unlock” them prior to sending them to investors. Others aren’t even catching them until an investor rejects their delivery. Regardless, these locked documents are weeds in our spring garden and require someone to manually pluck them.

****Watering The Soil

****And like any gardener knows, weeds can grow out of control. When I think about where we are trying to head, I am worried about these pesky weeds that keep sprouting up. What will happen next spring when lenders are required to submit to the UCDP? Just like investor systems, the UCDP won’t be able to process certain locked documents. Are the lenders comfortable that their appraisals will either be able to be ingested by the UCDP or have the necessary XML from their appraisals to submit to the UCDP? Today, these documents are causing issues for investors. Tomorrow, will they be causing issues to our appraisal data initiatives?

****If our industry wants to keep an orderly garden, we need to unearth some of today’s issues. While appraisers continue to feel it is necessary to lock documents, this has the potential to create headaches for fellow participants downstream. While this seems like a minor issue, I would argue that we need to address the issues of today so we can enjoy the beauty of our garden’s perennial blooms tomorrow.

**Brain Trust Matters**

***First, IndiSoft a technology development firm that provides software as a service (SaaS) solutions based on a collaborative rules-based workflow platform for the financial services industry, announced today that Earl Devaney has joined its advisory board. Devaney recently retired from the federal government after 41 years. He will advise IndiSoft on business development efforts and other company business based on his government financial expertise. Here’s the scoop on this hire and another hire on a prominent valuation provider follows:

****“Earl’s government expertise and strong financial management background will put us in a stronger position to offer technology that provides the transparency needed in auditing and compliance processes,” said Sanjeev Dahiwadkar, CEO of IndiSoft. “Providing the financial industry the most advanced technology while preventing a repeat of economic decisions that got us where we are today is one of our top priorities.”

****Devaney was most recently the chairman of the Recovery Accountability and Transparency Board, which oversaw the distribution of the $840 billon of stimulus funds allocated by the Obama administration. His innovative use of disruptive software has revolutionized the way oversight and accountability will be conducted for the foreseeable future. He was also the presidential appointed inspector general of the Department of the Interior for eight years and was the director of criminal enforcement at EPA for nine years. Devaney spent 21 years in the Secret Service during which time he earned his international reputation as a financial crimes expert.

****“I have been fortunate to experience first hand how the effective use of technology can improve transparency and accountability and; therefore, help raise the confidence of the American public in its government,” Devaney said. “While serving as the chairman of the Recovery Accountability and Transparency Board, we were able to provide an unprecedented level of oversight, and it was always new software that became the game changer in that effort. IndiSoft is just the kind of company that can provide the technology the government needs.”

****Second, Valuation Partners, a national appraisal management company with access to over 15,000 independent fee appraisers in all 50 states, has hired Clint Reinhardt as vice president and national account executive. Reinhardt brings more than 25 years of appraisal, mortgage banking and settlement services experience to Valuation Partners as well as proven sales leadership and a thorough knowledge of credit, flood and automated valuation products and services.

****Reinhardt will be responsible for broadening Valuation Partners’ reach in the central U.S., from the Rocky Mountains to east of the Mississippi River. Reinhardt began his career as a top performing loan officer for Citibank Mortgage in St. Louis, Missouri, later serving as an assistant vice president for the company. Most recently, Reinhardt was vice president and regional sales manager for Bank of America’s correspondent lending division, where he exceeded revenue and volume goals every year for the past five years. Reinhardt also served as first vice president and regional sales manager for LandSafe, where he led the company’s national team for its appraisal, credit, flood and automated valuation products, and as national sales manager for Equifax Mortgage Services.

****“Clint is a business development ‘pro’ with a history of exceeding the sales goals of some of the biggest names in the mortgage industry,” said Valuation Partners CEO Bill Fall. “We’re very proud to have someone of Clint’s caliber on our team.  We expect him to be a vital part of our continued growth throughout the Midwest.”

****“With the uneven nature of the nation’s housing recovery and a record number of REO properties on the market, lenders have never had a greater need for accurate and diverse valuation solutions as they do today,” Reinhardt said. “I’m thrilled to be joining Valuation Partners, which has emerged as a true leader in the valuation field. I look forward to building on their success.”

**By Tony Garritano**

***Excuse me today my friends. I’m a bit tired. I was up until 3 a.m. waiting for the results of the Iowa Caucus. My friends know that I’m a political junkie. What happened yesterday in my view was amazing. A conservative state voted for a candidate that didn’t match their ideals absolutely. Why did they do that? Because Iowans realized that it’s not about who is the most conservative, it’s about who can save our country from the failed policies of this White House. Kudos to Iowans for reassessing the landscape and taking a second look to pick the most electable, and competent, candidate. Similarly, prominent mortgage technology vendors are always reassessing the best way to serve this ever-changing mortgage market. For example, PROGRESS in Lending has learned that Franklin, Tenn.-based Wipro Gallagher Solutions has redefined its fulfillment offerings to more clearly meet the demands of loan originators and servicers for middle- and top-tier lenders. What does that mean? Here’s the scoop:

****For originators, WGS has revised its BPO offerings depending on the lender’s volume of originations and service offerings. WGS now offers originators its services through the following packages:

****>> Platform BPO Fulfillment Solution- offers an end-to-end mortgage origination fulfillment solution including all services from the point of application. Utilizing shared resources and technology based out of the Nashville Delivery Center.

****>> Integrated BPO Solution- tailored to meet the client’s specific needs and is inclusive of support-functions in the areas of loan processing, loan underwriting analysis, closing, funding coordination and post-closing delivery. The delivery staff works within the client’s existing technology and workflow process.

****>> Traditional BPO Solution – provides support for lenders on full functions within the loan process such as processing or post closing or sub-functions of these roles. Clients provide the standard loan lifecycle processing functions while WGS’ global team provides integrated back-office support. Work is performed based upon client-specific processes and procedures.

****For loan servicers, WGS now offers the following product suites tailored to fit their needs:

****>> Complete Subservicing Offering- supplies a complete private-label solution in partnership with a leading U.S.-based sub-servicer. This end-to-end offering enables significant per loan cost savings to each client.

****>> Back Office BPO Solution- supports full functions within the servicing stream including payment processing, reconciliations, loan modification, loss mitigation, and more. The delivery staff works within servicer’s existing technology and workflow process.

****“Wipro Gallagher Solutions has reorganized its private-label BPO offerings into packages that are simple to understand and are tailored to specific markets,” said Narayan Bharadwaji, business head for WGS. “The new packaging better serves our customers to fit their specialized needs and provides more flexibility to enable our customers to focus on their core business and target markets.”

**By David Lykken**

***About nine months ago, I started seeing evidence that the mortgage industry could be heading for an unanticipated crisis as a result of the new National Mortgage Licensing System which is causing a mass exodus of loan originators from our industry. By October of this past year, I had sufficient data points to make the following prediction at the National MBA Convention in Atlanta. My prediction was and remains this: “The precipitous rate at which loan volumes are falling could be unexpectedly exceeded by an even greater and more precipitous drop in the number of licensed loan originators available to serve the financing needs of the public!” I went on to say that this is setting us up for something we have never seen before in this industry. While the supply of and demand for loan originators is adequate today, we may soon see that day where we as an industry, may not have a sufficient supply of loan originators to meet consumer demand for mortgage loans. In other words, we will soon experience a significant “Capacity Crisis”.

****When I made the prediction, I did not comprehend the potential magnitude of this crisis. In February of this year, when I again made this same “capacity crisis” prediction at the Southeastern Secondary Marketing Conference in Tampa Bay, the Florida State licensing authority in attendance at the conference confirmed that it is astounding how few loan origination license applications they have received. This past week at the Texas Mortgage Banking Association’s educational conference, the head of the Texas regulatory agency confirmed the same, and we are hearing similar reports from regulators in Michigan and many other states. Almost across the board, 90% of all registered loan originators that were previously registered/licensed have either not applied to have their license renewed or have failed the loan originators exam or have been disqualified because of their credit score. If you think about this for very long, the implications are astounding!

****Think about it, GONE are nine out of every ten loan originators that participated in the last business cycle. If you are not seeing evidence of this, it may be because some have chosen, at their own peril and even more so their company’s peril, to continue to originate without a license. If that is the case, it will come back to bite them and any company that foolishly allows an unlicensed LO to originate loans within their organization.

****So what are the implications of all this? Four quickly come to mind and they are: TECHNOLGY, RECRUITING, TRAINING & GREATER EARNINGS. Allow me to explain:

****>> We are going to be more reliant than ever on technology to effectively manage the numerous new risks and to help new LO’s originate.

****>> Recruiting new loan originators is going to be key to a company’s future.

****>> Training is going to be a big need in the years to come.

****>> Increased earnings for the companies that survive and for those individuals that are licensed because of less competition therefore more volume for the remaining 10%.

****So what are you thoughts? I wrote this just to get you started thinking about what the implications may be to the coming “capacity crisis.” I want to hear from you. E-mail me at DLykken@MortgageBankingSolutions.com.

**By Tony Garritano**

***I know we all want to know what’s going to happen in our business this year. There are a lot of uncertainties for sure. However, we’ll face them and overcome them, I’m sure. I know that today is a light day. Everyone is just getting back over the holidays. So, I thought I’d keep it light here in my column as well by starting off 2012 with some predictions. Here goes:

****Yesterday a good friend to PROGRESS in Lending, David Lykken invited us on his weekly radio show. Myself, Roger Gudobba, Michael Hammond, Kelly Purcell and Gabe Minton talked about all things technology in 2012. Listen to what we all had to say:

****Being part of the Lykken on Lending Radio Show each week is real treat for me. I love doing it. I hope you found this edition of the radio show helpful and I hope that you’ll tune in every Monday at 1 p.m. est. It’s a great industry resource.

**By Harvey Foster**

***There is no question that technology advances such as multi-vertical origination software have enabled financial institutions to implement customer-centric business models. Lenders certainly need to be nimble when it comes to product and process. But it does not stop there. Financial institutions need to add a new word to their lexicon: transparency. This term is becoming foundational to how the loan operation relates to regulators, borrowers and other departments within the institution. Transparency is not only being able to provide insight into origination processes and practices, but it also means being able to pass along transactional data to those who request it, when they request it and in the format they request it.

****Looking back as far as a decade, some astute financial institutions began to realize that their loan origination systems were becoming outdated and were based on technology that was increasingly more difficult to maintain. But the influx of new loans suppressed system upgrade projects. As a result, the current technology landscape is rife with redundant, inefficient, and incompatible systems that are increasingly costly to maintain. The long-term result of this uncoordinated growth was a focus on vertically segregated products and a business-line approach to managing customers.

****Many institutions have grown accustomed to having one system for first-lien mortgages, another system for second liens, a third for lines of credit secured by real estate, and possibly even a fourth system to accommodate other consumer installment products. In such a stratified operating environment you may also find deployment of separate systems to help manage collections and investor accounting in an attempt to bring cohesion to disparate servicing systems. Aging components and a mixed bag of interfaces jeopardize the entire lending infrastructure. The risk of failure increases and the cost to maintain status quo escalates rapidly. Cost and risk pressures prevent some institutions from installing upgrades that are critical to their business.

****The future of origination technology resides with multifunction, multi-vertical solutions. New systems, such as Common Origination Platform from Fiserv, will be used to support multiple loan products, both secured and unsecured. To keep operations nimble, these solutions will have embedded rules and other controls to empower lenders. They will also be real time to ensure immediate awareness of transactions across the enterprise.

****Common Origination Platform and other systems like it combine intelligent processing automation with next-generation, sophisticated technology architecture. With customer data housed in one database, lenders can effectively reduce risk, gain processing efficiencies, take advantage of cross-sell opportunities and use information more effectively across the enterprise.

****Process Automation

****Offering process improvements and greater levels of automation, single platform environments such as Common Origination Platform enable financial institutions to originate all consumer, business and mortgage loans utilizing the same tools (including all processes, workflows and business rules management performed) and skill sets. Defining or modifying actions, behaviors and workflows within this environment is easily accomplished by manipulating the built-in business rules, giving an organization much greater control over its own specific processes. Streamlining in this fashion can open up new avenues for cost management strategies and greater profitability.

****Single System IT Support

****Operational efficiency is built into an integrated platform. Having just one system means that any updates, changes or modifications are applied enterprise-wide, saving resources and money. Systems such as Common Origination Platform that can handle multiple loan types across multiple channels enable the organization to devote IT resources to maintaining and supporting just that system. A common platform also eliminates the need to train separate technical staff or users to handle different technology applications.

**Nationwide Property And Appraisal Services Profiled**

***Starting on March 19, 2012, for any loan originated on or after December 1, 2011, the GSEs will require that appraisal reports be submitted in a specific GSE-approved format, through their Uniform Collateral Data Portal. Nationwide Property and Appraisal Services has integrated GlobalDMS’ Global Kinex appraisal review and delivery technology as the foundation of its proprietary software to ensure full compliance with the Uniform Collateral Data Portal (UCDP) program. Here’s why they chose Global DMS:

****Nationwide Property and Appraisal Services is using Global Kinex as its UCDP-compliant appraisal review and delivery solution since November 2011. By establishing a fully-compliant appraisal delivery program months prior to the UCDP utilization deadline, Nationwide Property and Appraisal Services had sufficient time to research options and select the solution that best met their needs.

****“We saved over $10,000 in the long run, plus we get service levels that are head and shoulders above the other vendors we considered integrating with—that’s a big win for us and a big win for our customers,” said Ryan Hernberg, president of Nationwide Property and Appraisal Services. “We make a habit of implementing compliance solutions far before deadlines. Preparation, combined with sufficient time to find the most cost-efficient option, gives us a competitive edge when it comes to quality, service levels, speed and pricing. We don’t have to worry, and neither do our lender clients.”

****Global Kinex is a UCDP-compliant appraisal review and delivery solution. The technology extracts and converts data from a PDF-formatted appraisal, converts the data into a GSE-approved format, reviews appraisal data for errors, inaccuracies or other violations, provides a score based on the review findings and submits appraisal reports to the UCDP, all in full compliance with UCDP guidelines, in just a matter of moments. The system can be set up to manually control each step or to function automatically.

****It takes only a couple of days to implement Global Kinex, but companies must also register with the GSEs before they can compliantly deliver loans through the UCDP. “Registering with the GSEs can take two weeks, which is why smart companies like Nationwide Property & Appraisal Services have started the process of implementing their UCDP compliance programs early,” said Vladimir Bien-Aime, CEO of Global DMS. “By starting early, they have the time to separate fact from fiction—often to the tune of $10,000 or more. Getting a head start on compliance should not be cost-prohibitive and with Global Kinex, it’s not.”

**By Tony Garritano**

***Are you frazzled dealing with all the new rules and regulations? Aren’t we all? In most cases, it’s the job of your vendors to keep you compliant. And the good ones are doing just that. Fior example, PROGRESS in Lending has learned that LOS Avista Solutions has completed a direct integration to ComplianceAnalyzer, an automated compliance auditing solution from risk management solution company ComplianceEase. Here’s the scoop:

****Avista Solutions and ComplianceEase have a number of mutual customers and this integration allows those customers to access the ComplianceAnalyzer solution directly from their Avista Agile LOS.

****ComplianceAnalyzer gives mortgage lenders real-time compliance audits at any point in the lending process, safeguarding them from potential loan risks. As part of recent electronic examination (e-Exam) initiatives, state regulators have been using ComplianceAnalyzer and other e-Exam tools to audit as much as 100% of licensees’ loans in regulatory examinations. By leveraging integrated audits using the same auditing software, lenders can prepare in advance for their e-Exams. ComplianceAnalyzer covers a full spectrum of government regulations, including the Home Ownership and Equity Protection Act, the Truth in Lending Act, RESPA, state and local anti-predatory lending laws, state license-based consumer lending regulations and secondary market investor and GSE compliance guidelines.

****“Avista Solutions recognizes the importance of providing our customers with access to industry leading compliance tools,” Avista Solutions COO & CFO Jerry White said. “As the company behind robust tools that state banking and mortgage regulators rely on, ComplianceEase is a significant force in the mortgage industry and we are excited to now offer a seamless, system-to-system interface to their ComplianceAnalyzer solution.”

****Avista customers who choose to sign up for ComplianceAnalyzer may utilize the tool to pinpoint a mortgage loan’s compliance risk factors, whether the loan is in the pre-close or post-close stage, with a single click and without leaving their Avista Agile LOS. ComplianceAnalyzer returns comprehensive, user-friendly audit reports to lenders within seconds. Each report features the industry standard RiskIndicator, a score that reflects a loan’s compliance risk, as well as quantitative analysis of thresholds and detailed qualitative overviews with narrative descriptions of regulatory requirements.

****“Avista users can enjoy the best of both worlds with this seamless integration, continuing to use their LOS of choice, while managing compliance with ComplianceAnalyzer,” said ComplianceEase Senior Vice President Jason Roth. “Major secondary market investors use ComplianceAnalyzer to check every loan prior to purchase and state regulatory examiners are using it to audit as much as 100% of licensees’ portfolios. To safeguard their reputations and reduce financial risks, it makes a lot of sense for lenders to do the same.”

**By Rick Grant**

***Now that you’ve got your own platform to speak from in the shape of a blog, don’t think that means you can totally ignore what other bloggers are saying. If anything, this is the time to up your game when it comes to commenting on other blogs. But of course, like everything else, there’s a right way and a wrong way to handle this.

****Some people may tell you that for however many posts or comments you read, you should be writing a certain number of comments. This approach makes no sense to me. You’re not going to know in advance how many of the posts you read each day are going to strike a chord with you. Don’t be driven by numbers. It’s never a good idea to be constantly visible, especially if it comes at the expense of value. Focus instead on making comments only when and where you will be adding value to the conversation.

****In order to ensure that you are adding that value, you first need to be sure that you’re commenting on the right blog. Does the blog you’re reading share the same audience you’re trying to reach? If not, you may be barking up the wrong tree. There are plenty of blog search tools out there to help you find the right one. The first engine that comes to my mind is http://blogsearch.google.com, where you can do a simple keyword search or define specific parameters for what you’re seeking.

****You can also set up Google Alerts on blogs to see who’s talking about the things that concern you. And there are many good feed readers out there that will pull all your feeds into one place for you to read and consider.

****I like Google Reader, where you can see your Google Alerts and any RSS feeds all on one page. From there it’s one click to get to the actual post where you can make your comments.

****Once you find the blogs you should be reading, see which blogs those bloggers read—this is just another flavor of networking. More often than not, you will find the blogs read by the bloggers you read just as valuable.

****It’s okay to put links in your comments, but never link back to your own blog more than once in a comment. Usually the comments section of a blog will have a place for you to identify yourself and link back to your blog anyway. There’s no need to go overboard in your self-promotion, especially when you run the risk of being labeled a spammer. Make significant comments often enough and the blogger and other readers will come to know your name and your own blog easily enough.

****Remember that your primary focus in commenting on other blogs is adding value to the conversation, not driving traffic to your own blog. If you are truly adding value to the conversation, traffic to your blog will come naturally. And that’s the way you want it.

**Validating MERS Electronically**

***Aklero Risk Analytics Inc., a provider of mortgage quality control software and services via their automated data and document validity assurance platform, has unveiled DQx for MERS Data and Document Validation Module. The module is part of Q-Close, their Loan Quality Management Platform, and provides an automated method to validate the accuracy of data resident in the MERS Electronic Registry. Here’s what you need to know:

****“We developed this offering in response to the requirements outlined in the MERS Quality Assurance Procedures issued in September requiring servicers to validate the accuracy of the data held on the MERS’ system against source documents,” said Richard J. Downing, Executive Vice President of Sales for Aklero.

****As a result, lenders are required to attest that they have performed a three-way document to data validation, including comparing the data on the MERS system against the bank’s data and against the “true data,” or original documents, a process that ensures a high degree of accuracy.

****“Aklero is the only firm in the mortgage industry that has automated the process of comparing the data that populates original documents to the records the servicers and MERS maintain,” said Julia Hernandez, Senior Vice President of Professional Services for Aklero. “People make mistakes, but, by relying on the original documents, especially those from the closing, our solution provides a more accurate and comprehensive audit.”

****That approach enables Aklero to review the documents and identify discrepancies. For servicers, the benefit of using this module is that Aklero can validate thousands of loans overnight, while in the same amount of time, servicers that cling to expensive manual processes complete far fewer loans files.

****Based in Fort Washington, Penn., Aklero provides mortgage quality control and risk analytics solutions for the mortgage lending industry. Its proprietary Q-Close Loan Quality and Mortgage Risk Analytics Platform provides loan audits and automated deficiency detection, allowing users to quickly and efficiently find, fix and understand problems in mortgage loan files. Augmenting its technology platform the company also provides forensic analysts, mortgage quality control audits, due diligence loan reviews and a variety of operational solutions and customizable products and services that can be tailored to suit clients’ needs. Aklero’s customers include mortgage lenders, institutional investors, investment banks, government agencies, community banks, credit unions, mortgage insurance companies and other financial institutions. After an in-depth evaluation that pitted the firm against its competitors, the American Banker Association, named Aklero its exclusive provider of mortgage quality control services.

**By Tony Garritano**

***This is certainly the time for giving. I challenge everyone reading this to think about how they can give back to their family, to their community, to mortgage lending. In this vein, PROGRESS in Lending has learned that to support the Marine Toys for Tots Foundation during the organization’s annual holiday collection campaign, Nationwide Title Clearing (NTC) hosted a toy drop-off at its Palm Harbor offices. This is the second year NTC has served as a collection center for Toys for Tots.

****Employees of the mortgage post-closing services provider and members of the community were invited to bring new, unwrapped toys to NTC’s offices, where the gifts were picked up by a local Toys for Tots representative last week in preparation for distribution to underprivileged children throughout Tampa Bay. In addition to the gifts contributed by employees and area residents, Nationwide Title Clearing also donated toys to the cause. Through combined efforts, the drive collected more than 200 toys.

****The Marine Toys for Tots Foundation is an IRS-recognized 501(C)(3) not-for-profit public charity, which serves as the fundraising, funding and support organization for the U.S. Marine Corps Reserve Toys for Tots Program. As stated by the organization, the goal of the program is “to deliver, through a shiny new toy at Christmas, a message of hope to needy youngsters that will motivate them to grow into responsible, productive, patriotic citizens and community leaders.”

****John Hillman, CEO of Nationwide Title Clearing, noted that NTC shares that commitment to supporting deserving children and families. In addition to the company’s participation in the annual Toys for Tots campaign, NTC has also been involved in other community relief efforts, including last year’s participation in the Homeless Emergency Project (HEP) in Clearwater. NTC employees and management collected items of necessity that were donated to homeless individuals, along with clothing and household goods that were sold through the HEP Thrift Store to raise funds for the organization’s charitable programs. Many NTC personnel have continued the help into this year by volunteering their time to assist in the HEP kitchens, which serve shelter residents in the local area. Other recent NTC projects include collecting used video games and gaming equipment on behalf of a local charity that donates the items to hospitalized children.

****While NTC’s clientele in the residential mortgage banking industry are located throughout the country, Hillman explained that the company’s corporate culture is focused on giving back to the community in which the organization and its employees reside. “All of us at Nationwide Title Clearing – from senior-level management to our professionals and support staff – believe it is important to stay grounded in the local community. We’re committed to lending our support to those in unfortunate circumstances and helping them attain a better quality of life,” he asserted. “I believe that philanthropy leads to prosperity; so by helping others in the community, we can make life in the Tampa Bay area better for everyone.”

**By Harvey Foster**

***Today I want to discuss operational efficiency from three different but equally important perspectives, each with strong implications for lenders. Fiserv is pleased to offer this information to enable you to be more knowledgeable in your evaluation of adopting a common loan origination platform and the strategy’s potential in terms of the borrower experience, your staff resources and your IT/hardware costs. Here’s what you should think about:

****The Customer Perspective

****In terms of both profitability from cross-sell opportunities and enhancing the borrower experience, lenders must consider the customer-centric perspective as critical for growing the organization’s loan portfolio.

****>> The multi-platform scenario – In this scenario, a borrower currently has a mortgage loan and a boat loan with the financial institution. Because the two original loans were processed on two separate platforms, customer data is stored in two places. More often than not, the platforms do not communicate with each other, so customer data-sharing is minimal, if not impossible. Gathering loan product scenarios from multiple origination systems is extremely complex and time consuming. Each application produces its own loan product information and the lender must then try to synchronize and deliver that data in real time to the consumer for true comparison. This not only curtails the lender’s ability to serve the customer but also inhibits the ability to spot product trends and cross-sell opportunities. If the customer now needs to finance an equipment purchase for a small business, he or she may have to start from the beginning in terms of completing the application, since the system used to originate business loans cannot access data from the previous loan transactions. This results in repetitive data entry, hinders timely and wise credit decisioning and increases the possibility for errors. In addition, it limits cross-sell opportunities because there is not one true snapshot of the borrower’s total relationship with the financial institution.

****>> The single-platform scenario – In this scenario, the lender utilizes a common platform to handle all processing for the borrower’s three loan originations. Borrower information is stored on one system, eliminating the need to share data between different platforms. When the borrower comes to the lender for another loan, virtually all financial information is already available to the lender through a search capability, simplifying the origination process for both borrower and lender. Data integrity issues are eliminated, and the borrower experience is a positive one. And, as cross-sell opportunities come about, the financial institution has a holistic snapshot of the borrower’s entire portfolio so it can make the most prudent – and potentially most profitable – product offers.

****The User Perspective

****Operational efficiency is directly tied to how internal staff is able to utilize technology resources.

****>> The multi-platform scenario – For lenders utilizing different platforms for different loan products, there is no common look and feel between systems. The Consumer Loan Department may have to learn one platform for equity loans and another for mortgage loans. The user experience suffers because staff members must create “work-arounds” or use manual processes to manage all accounts. Production personnel also have to be trained on multiple systems in order to support more than one type of portfolio. Origination volume suffers because of the extra time required to work with different systems and in different departments.

****>> The single-platform scenario – One platform means one look and feel. Multiple loan products are processed from the same system, so staff is trained once and empowered to work efficiently between lending verticals. The financial institution is able to standardize processes and procedures, and staff feels more comfortable and capable of contributing across loan departments. The single-platform approach leverages operational efficiency. Business users can set up processes across channels, users, departments and products with the requisite controls and history tracking to safely implement changes, and individual users can enjoy a streamlined productivity tool. The business rules management incorporated in a common system increases flexibility by letting lenders establish security and processes according to the needs of their business, and deploy capabilities and functions according to user roles and responsibilities.

****The Technology Perspective

****Technology that separates loans into distinct functional silos can be a barrier to driving down operational, implementation and support costs. With the fierce competition in today’s lending markets, implementing an efficient software deployment strategy can mean the difference between growing the portfolio and just surviving.

****>> The multi-platform scenario – Using multiple platforms makes managing the enterprise lending operation much more complex. Each distinct platform runs on a different operating system and database. The consumer platform may run a .NET Application, Oracle Database and a Citrix Server configuration, while the commercial system runs an AIX-based Java Application, IBM DB2 Database and an Internet Explorer deployment. The mortgage system may run on a C++ platform. As a result, IT resources must be staffed to support all three hardware platforms and their existing operating system applications. Just maintaining the three diverse systems for updates, compliance/regulatory demands and ongoing integration hampers the lender’s ability to keep up with market changes and conditions. In addition, staffing, training, operational cost, processing efficiency and the overall borrower experience are adversely affected.

****>> The single-platform scenario – Having one platform typically simplifies processing automation by providing tools designed to respond to industry and business changes quickly and efficiently. Usually, system tools allow the lender to establish security and create rules to ensure process consistency. Reducing disparate technology systems and redundant interfaces creates efficiencies because the same processes are applied to all loans. For instance, when compliance initiatives require updates, it is a one-time process. All testing to verify compliance with the new requirements is also performed only once. IT staff supports one platform, one operating system, and one database. Seamless data transfer assures consistent and accurate customer data throughout the origination process, regardless of loan type.

**By Tony Garritano**

***Many are worried about the new appraisal delivery transition, but it doesn’t have to be hard. Vendors and AMCs are there to help. For example, InHouse Inc., a provider of appraisal technology for banks, lenders, credit unions and other mortgage originators, is successfully integrating lenders and appraisal management companies (AMCs) to the Uniform Collateral Data Portal (UCDP) in a matter of a few weeks, and without the long term contract required by many others.

****“InHouse is helping lenders connect and deliver appraisals electronically to the portal in record time,” asserts Jennifer Creech, president and chief executive officer of InHouse. ”We can help lenders and AMCs integrate to UCDP in about half the time it would take them to do a manual interface with the GSE website, or in two to three weeks,” Creech added.

****As part of the new GSE appraisal submission requirements, appraisals must be supplied in MISMO XML format or as a first-generation PDF.  InHouse’s Connexions technology can easily convert first-generation PDFs into the MISMO format for faster submissions. In addition, Connexions validates the compliance and tracks the status of all appraisals.

****Lenders and vendors can choose between 26 providers when it comes to integrating to UCDP, though InHouse is one of only 13 providers offering access to the UCDP directly, versus through the GSE’s web-based interface, which requires a more time-consuming integration project.

****AMCs, loan origination systems and lenders seeking access to the UCDP directly may leverage InHouse’s integration and electronically submit appraisals to the GSEs. Doing so eliminates the manual upload process in the user interface. InHouse is offering a very competitive one-time integration fee of $5,000 without a long term commitment, and a per transaction fee of $2.00.

****All AMCs, appraisers and lenders on the InHouse Connexions platform are able to submit appraisals to the GSEs in accordance with the new appraisal submission standards in effect for loans originated after December 1, 2011 and delivered on or after March 19, 2012.

****Partnering with InHouse for direct access to the UCDP gives lenders and AMCs a much more efficient option, Creech said. “The integration time is reduced to two to three weeks, and it’s very cost-effective for the lender or AMC compared to packages offered by competitors. “There’s no need to code to the complicated UCDP specs. Lenders and AMCs only need to send a MISMO file through, and InHouse takes care of the rest,” she added.

**E-Appraisal Partnership Forms**

***ACI, a leading innovator in valuation technology for the mortgage industry, announced that StreetLinks Lender Solutions has integrated with ACI’s eServices, an appraisal delivery service to help ensure compliance with client/lender and investor requirements. eServices combines appraisal compliance and quality rules with electronic delivery as a standard feature accessible from the appraiser’s ACI desktop software. ACI’s approach helps ensure that appraisal data complies with both the Uniform Appraisal Dataset (UAD) and MISMO XML requirements before the appraiser completes the appraisal report.

****“ACI uses integration services from its appraisal software to create customized delivery solutions. The new StreetLinks eService provides a connection for us to seamlessly receive native XML directly from appraisers’ computers with the assurance of our quality and compliance standards,” said Tony Ebeyer, chief strategy officer for StreetLinks. “The ACI system is intuitive and allows for additional flexibility in processing and managing appraisal reports. That’s why thousands of StreetLinks appraisers will rely on it every month.”

****Prior to delivering the appraisal report to StreetLinks, the new eService performs an in-depth quality control review using ACI’s PARLogic review rules. The comprehensive library of both industry best practices and job-specific business rules checks the appraisal report for compliance with StreetLinks’ policies. Once the appraiser has satisfied the requirements, the file is delivered to StreetLinks for further processing and eventually delivered to either Fannie Mae or Freddie Mac.

****“As a result of this technology collaboration with StreetLinks, we have developed a comprehensive pre-delivery UAD audit and XML delivery service that makes the process for the appraiser simple and efficient,” said George Opelka, senior vice president for ACI. “The upgrade provides greater accuracy, which benefits all parties — appraisers, management companies, the GSEs, and borrowers.”

****ACI’s appraisal solutions are tailored to the needs of the organizations ACI serves. The ACI client base features many of North America’s premier lenders, national appraisal companies, and real estate brokerage firms. From connecting appraisers nationwide to streamlining quality control, ACI enables organizations to process appraisals and manage.

**By Michael Hammond**

***Think a minute: What was your last family vacation like? Now think about the projected level of defaults in 2012? Which is easier to remember? Let’s make this exercise even simpler, quick, think of a good story you’ve heard in the last few months, or even years – any story (short story, childhood bedtime story, a narrative joke, story in a presentation, etc). Now think of a couple of good statistics you’ve heard in the last few weeks. Which one came easiest? Nine times out of 10, it’s the story. Stories stick in your head, sometimes for years.

****Now you’re saying, “Get on with it, how does this relate to my business?” Well, there’s a lot of attention around corporate content now. Relevant content. Compelling content. Engaging content … and tons of posts on techniques - how to spin the content, how to write powerful headlines and so on. In an article called “Steve Jobs and the Power of Storytelling,” Mark Ivey provides some tips on how you can better tell your corporate story to attract new business.

****He says, “Less attention is given to storytelling. That’s weird since social media is the perfect opportunity. Bloggers are our modern day storytellers. They’re not marketers, as many like to think, but humans with emotions, history, baggage – and specific views of the world. In other words, they are all walking stories, ready to be told.”

****When you really think about it, stories are more powerful today than ever. Why?

****>> We are drowning in information. Good stories can cut through the noises

****>> Personal stories feel “real” vs. abstract concepts, statistics, or logical arguments

****>> Stories capture people on an emotional level, creating a deeper, intimate bond.

****>> Stories are memorable. People forget facts but remember stories.

****In the book, A Whole New Mind, author Daniel Pink (in a full chapter) captures the essence of stories: “Stories “are important cognitive events, for they encapsulate, into one compact package, information, knowledge, context and emotion.”

****Some elements of a good story include:

****>> A clear beginning and end

****>> Clear message

****>> It’s authentic

****>> It’s relevant

****>> Engaging (often with drama or tension)

****Strong stories have a natural flow, and never leave the audience wondering where it’s going (“What’s the point to that”?) Ivey notes, “I can’t think of a better modern day example of this than Apple’s Steve Jobs, who was fired from Apple, then returned to save the company and transform it into a media powerhouse. His Stanford commencement speech is an example of a great story using the hero’s journey model.

****“It has all of the right elements, starting with an engaging life story – how he was born to a young, unwed college graduate, adopted by working class parents, etc. Later, talks about bouncing around an expensive private college he can’t afford, sleeping on his friends’ dorm room floors, finally dropping out.

****“The first story talks about how his one class in calligraphy wound up helping him create the first typefaces in the original MacIntosh. His next two stories were even more powerful, talking about love and loss, and facing death. One message was he’d have “never been successful if I hadn’t been fired by Apple” the first time around. He goes on to talk about his emotional battle and facing cancer and death, and how that transformed his thinking. Now every day counts. This speech is authentic, gritty, and relevant for a college audience about to set forth into the world. His message was simple and powerful:

****“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma — which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition…”

****How can you learn from this? You don’t have to turn every corporate blog or speech into a personal, life changing endeavor on this level. What I’m suggesting is you at least start injecting more of a human voice, using your own personal stories to provide context and perspective. With blogs, the approach could be a simple as: A) I faced a big challenge/dilemma. B) I overcame it through these x steps. C) Resolution, results and ending (optional call to action).

****So think through how you can collect and tell stories through your speeches, blogs and other social media efforts. Play journalist as you go through your normal daily activities and keep a notebook. Your message is that “it’s ok” to be a storyteller, since so much of our training in the corporate world is to focus on the facts and process. None of this is really new. Technologies and platforms will come and go, but human nature changes slowly if at all. So, tell your story.

**By Daniel Liggett**

***This is the first article in our ‘Lender Spotlight’ series where we share stories from actual lenders about how they select and implement technology initiatives. Each story is told by the decision-makers themselves and describes in detail, the thought process behind their choices. This week’s ‘Lender Spotlight’ focuses on Florence Savings Bank in Ware, Massachusetts.

****Too often during searches for new lending technology, the majority of the focus is placed on the functionality and capability of the product, and the importance of vendor quality is either undervalued or overlooked.

****This can be highly detrimental to a lending organization in search of enterprise-wide technology because the quality of whom you deal with can be the determining factor in the degree of success that is achieved with the technology.

****Florence Saving Bank, a $1.1 billion lender in Central Massachusetts performed quite a bit of due diligence before deciding on an LOS. We, like many others, were bogged down with regulation changes and could no longer tolerate the maintenance, inefficiencies and limitations of their antiquated LOS of ten years. We wanted a flexible, online solution that could handle both mortgage and consumer lending. Vendor quality was of concern after experiencing a decline in support over the lifetime of their LOS.

****Jeff Smith, Vice President at Florence Savings, and his team prepared a detailed list of functionality that they required. They looked at nearly a dozen LOSs, choosing three or four to review in depth. None of them handled all of our requirements, nor did any differentiate themselves from the other.

****We then began hearing success stories from lenders using an LOS, available from an area reseller, that wasn’t even on Florence Saving’s initial list of candidate systems. We grew more interested as the varying lenders we encountered described the RemoteLender LOS provided by Specialized Data Systems. The more we listened, the more we were intrigued that this single LOS was able to meet the varying needs of the different lending operations and I was especially surprised when each lender repeatedly cited SDS’s high level of service as a determining factor in their success.

****Armed with this feedback, we then performed an in-depth technical review of RemoteLender and also scrutinized SDS to determine their viability, experience and capability as a vendor. It was important to Florence that SDS could handle the implementation and customization of the LOS, as well as all phases of ongoing maintenance, including monitoring compliance issues.

****After passing the most exhaustive review of any technology in its history, we chose RemoteLender. SDS went to work assessing the banks’ requirement, developing a phased implementation project plan and refining RemoteLender to fit our lending model.

****We received great support from SDS during the rollout phase. We had weekly scheduled conference calls to keep us on task and set forth milestones to monitor our progress. With SDS being essentially a ‘local’ vendor, they are here for us to provide the support and business services that we need to achieve our goals.

****SDS handles all of the custom reporting and integrations, and since RemoteLender is deployed online, SDS continues to maintain all hosting functions (through a third-party) including all IT, security, backup and connectivity tasks.

****Our RemoteLender is not like any other banks’ system, it does what we want it to do the way we want it. We are fortunate to have SDS as our vendor because we plan to keep RemoteLender for 10-15 years.

****The key to a long-lasting LOS is performing the due diligence on the vendor as well as on the functionality. The quality of the vendor and the level of service they provide are essential to getting the most from your technology and achieving your lending goals in the most cost-effective manner.

****Next week’s ‘Lender Spotlight’ focuses on an Eastern Connecticut lender who chose PowerLender deployed in-house.

**By Tony Garritano**

***Estimates about how large the shadow inventory is and how long it will take to dispose of vary. What we know for sure is that the inventory is huge and it will put a crimp in industry recovery for some time. PROGRESS in Lending has learned that according to CoreLogic, the current residential shadow inventory as of October 2011 remained at 1.6 million units, representing a supply of 5 months. This was down from October 2010, when shadow inventory stood at 1.9 million units, or 7-months’ supply, but approximately the same level as reported in July 2011.  Currently, the flow of new seriously delinquent loans into the shadow inventory has been offset by the roughly equal flow of distressed (short and real estate owned) sales. Here’s what else the CoreLogic research revealed:

****CoreLogic estimates the current stock of properties in the shadow inventory, also known as pending supply, by calculating the number of distressed properties not currently listed on multiple listing services (MLSs) that are seriously delinquent (90 days or more), in foreclosure and real estate owned (REO) by lenders. Transition rates of “delinquency to foreclosure” and “foreclosure to REO” are used to identify the currently distressed non-listed properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory. Shadow inventory is typically not included in the official metrics of unsold inventory.

****Data Highlights:

****>> As of October 2011, shadow inventory remained at 1.6 million units, or 5-months’ supply and represented half of the 3 million properties currently seriously delinquent, in foreclosure or in REO.

****>> Of the 1.6 million properties currently in the shadow inventory (Figures 1 and 2), 770,000 units are seriously delinquent (2.5-months’ supply), 430,000 are in some stage of foreclosure (1.4-months’ supply) and 370,000 are already in REO (1.2-months’ supply).

****>> Florida, California and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory.

****>> The shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006.  A healthy housing market should have less than one-month’s supply of shadow inventory, which would be an easily absorbed stock of distressed assets with little or no discernable impact on house prices, unless the inventory was geographically concentrated.

****>> Despite 3 million distressed sales since January 2009, a period when home prices were declining at their fastest rate, the shadow inventory in October 2011 is at the same level as January 2009.

****>> Because shadow inventory is often concentrated in suburban and exurban submarkets, where distressed sales compete with new construction sales, it is one of the reasons why new home sales continue to be weak. In normal times, new home sales account for 12 percent of all sales, but they are currently running at 7 percent of all sales.

****>> Based on current estimates of the visible inventory (both distressed and non-distressed), the shadow inventory is approximately half of all visible inventory listings. For every two homes available for sale, there is one home in the “shadows” (Figure 3).

****“The shadow inventory overhang is a large impediment to the improvement in the housing market because it puts downward pressure on home prices, which hurts home sales and building activity while encouraging strategic defaults,” said Mark Fleming, chief economist for CoreLogic.

**By Harvey Foster**

***Lagging technology is a key cause of higher operational costs and organizational inefficiency, which negatively affect both profit margins and the borrower experience. For lenders using numerous lending platforms to manage various loan products, the challenges associated with aging technology are only multiplied. In uncertain markets, IT budgets are quickly eaten up on maintenance and compliance initiatives, with little left over for new products, services and capabilities.

****Maintaining different technology platforms across lending silos also breeds duplication of effort, redundant processing and IT support, and inefficient use of valuable staff resources. Since each platform is unique, there is virtually no standardization of processes, procedures or best practices.

****Disparate Lending Platforms Deliver Operational Inefficiencies

****Lenders that utilize different loan origination systems to support mortgages, business loans and consumer products cannot help but find operational inefficiencies lurking around every corner. Multiple platforms inhibit enterprise-wide customer views and data utilization. As a result, cross-sell opportunities are missed, communication both internally and with the borrower is ineffective, and customer data retrieval and verification are inconsistent.

****Lending platforms often utilize entirely different processes and procedures, severely limiting the ability to have a collaborative lending strategy on an enterprise scale. A multiple-platform approach also triggers inconsistent decisioning, which lengthens the loan origination process and impacts profitability. This approach can even affect the borrower experience, as inefficient processing dashes customer expectations for “right now” loan options, approvals and documentation. Further, since each system requires maintenance and support, there is significant – and costly – duplication of effort, driving up operational costs and wasting manpower.

****Challenges Posed by Inefficient Technology

****In a poll conducted by Fiserv in late 2009, 40 percent of respondents indicated that they have the right business strategy but need to better leverage technology. When asked if their technology enables them to keep pace with the current lending environment, nearly one-third said they wished they were better at leveraging opportunity.

****The figures are telling and suggest some of the circumstances faced in the executive suite relative to lending strategy going forward.

****>> Chief Operating Officer – Developing, enhancing and maintaining efficient organizational processes can be severely challenging for organizations. The reporting and monitoring of operational metrics for multiple lending platforms is labor intensive and cost prohibitive. The effort required to promote best-practice processes across verticals can divert attention away from more beneficial duties, such as fine tuning day-to-day performance to promote company growth, increased profitability and future expansion.

****>> Chief Information Officer – Directing data information and integrity throughout the organization can be problematic. Each lending system has its own technology, making the infrastructure and networks extremely difficult to manage and maintain. Disparate loan systems may not link together, making the validation and certification of customer data exponentially more challenging for the CIO and the organization.

**By Tony Garritano**

***Usually when a technology vendor acquires another vendor you see a slow transition whereby eventually one product becomes more robust and the other is grandfathered. However, Ellie Mase is getting to work fast on making the most out of its acquisition of DataTrac. PROGRESS has learned Ellie Mae’s second major release of its Encompass360 mortgage management solution is now live. This release contains new functionality and enhancements designed to further increase compliance, efficiency and ease of use. It also introduces Encompass Originator, an integrated front-end technology solution specifically for users of DataTrac mortgage software. Here’s the scoop:

****The upgrade’s major enhancements include:

****>> Functionalities for complying with the new data delivery requirements, including the Uniform Loan Delivery Dataset (ULDD) and Uniform Collateral Data Portal (UCDP)

****>> Integration with DataTrac, through Encompass Originator

****>> New secondary marketing functionalities for Encompass360 Banker Edition clients

****>> New document recognition functionality with bar coding for all e-disclosure and closing documents

****>> New and expanded status online communications options

****>> Ability to process borrower credit cards in the appraisal solution center

****>> Numerous additional client-requested enhancements

****Encompass360 now supports ULDD requirements, enabling users to export one or more loan files to be submitted to the GSEs. The new UCDP service, which uses an integrated systems interface to the GSEs’ UCDP, allows users to submit electronic appraisal data files, receive status and findings, correct and modify appraisal file submissions, and request overrides should an appraisal not be accepted by the UCDP.

****This upgrade’s trade management and secondary marketing enhancements enable more flexibility with detailed viewing and tracking of mortgage-backed securities and assignment of trades. Rate lock and secondary registration enhancements include lock extensions and expanded functionality for buy side profit and price concessions.

****Among the many additional upgrades are enhancements to Encompass360′s electronic document management capabilities, which include additional bar coding, destination scanning from network scanners to eFolders, and eSigning of non-disclosure documents. New status online communications now further support and extend clients’ brands by enabling consistency and structure across outbound communications to borrowers and partners. Numerous compliance-focused changes have also been made to support USDA loans, and changes have been made to the HUD-1, the statement of denial, and other forms.

****Further, Encompass Originator provides single-click access between Encompass360 and DataTrac, creating a front-end/back-end origination solution built on the two technologies. With this integration, users of both solutions can now easily submit loans directly from Encompass360 to DataTrac, without having to re-key, import or export any data.

****Encompass Originator includes all of Encompass360’s front-end capabilities, including all the new upgrade enhancements. Now DataTrac clients can have access to Encompass CenterWise, Ellie Mae’s secure web and electronic document management service; a secure e-folder for paper-free document signing and exchange; numerous integrations with third party solution providers; easy-access customizable pipeline views; HUD integration; powerful tracking and alert systems; built-in compliance management tools designed to enhance RESPA and MDIA compliance; appraisal ordering and management, customer relationship management and more, all from the same company.

****“The industry’s changing regulations and procedures are putting a lot of new demands on lenders, and this upgrade provides the tools to respond to many of those demands, whether from regulators or investors,” said Jonathan Corr, COO of Ellie Mae. “At Ellie Mae, our clients feel comfortable about voicing their needs because they know we take action. This upgrade reflects the changing needs of our clients, while continuing our mission to build the most streamlined, easy-to-use technology for transacting the highest quality loans.”

**By Robert Shiller**

***It’s not your father’s notion of foreclosure out there these days. Today, foreclosure has become an uncertain proposition thanks to robo-signing, canny lawyers and judicial activists. Special servicers are using technology and great amounts of creativity to find better alternatives to foreclosure — and often with surprising results.

****Short sales, for example, have become an increasingly popular way to avoid foreclosure. Once thought of as a cumbersome process that could take the better part of a year for deals to find their way to a closing table (if at all), short sales can be completed in a third less time if everyone stays on the same page. Web portals bring real estate professionals together onto one platform, and special servicers like Wingspan with enhanced solutions handle the paperwork and negotiations to make this process more efficient.

****Using technology, special servicers bring real estate agents into the short sale process, allowing them to monitor daily activities and free themselves up for listing and marketing activities rather than camping out with paperwork. Special servicers can also work closely with lenders and investors through the web, providing transparent, fast communication among involved parties to hasten decision-making.  Sharing information and laying out tasks clearly streamlines the process and eliminates the confusion that has plagued short sales from the beginning.

****Foreclosure attorneys are working more closely than ever with special servicers to find foreclosure alternatives, too.  Even before the robo-signing crisis, Wingspan’s Preferred Attorney Network was set up to provide a last-ditch effort to avoid foreclosure even during its process.  With foreclosure itself an iffy proposition today, lawyers are finding they can directly affect home retention, and special servicers with these enhanced abilities are eager to oblige.  Homes that would otherwise go vacant and add to declining value scenarios are instead occupied by motivated families through creative workouts or non-foreclosure avenues, including short sales.

****Special servicing’s ultimate goal is to keep a borrower in their home, if there is a workable way to bring that about, in order to restore value to loans that primary servicing has given up on.  Using technology and highly specialized, borrower-focused skill sets, enhanced special servicing succeeds far more often than most industry people realize.  Single point of contact (SPOC) was baked into Wingspan’s approach from the beginning, with centralized data and fast ways to access it.  Using these new approaches, borrowers are often shocked to learn there are foreclosure avoidance scenarios that will work for them — and that there are ways to minimize credit rating damage if they must give up their homes.

****Accurate and comprehensive data complement something most observers do not truly understand about special servicing: it is a people business.  Positive results start with trust, and that is not always a simple thing to gain with borrowers.

****Delinquent borrowers are trained to avoid talking with servicers.  They read in the papers and online all the time about others who are stonewalling foreclosure and getting months of what amounts to payment and rent-free occupation in their houses.  They also know that the telltale hesitation on an incoming phone call means there is an automated system on the other end, most likely a bill collector, so they routinely do not answer.

****The new breed of enhanced special servicers does not use calling automation for this reason and goes to great lengths to make contact with desperate borrowers in a non-threatening manner.  This involves great amounts of time and repeated calls, but once the link is established, it becomes a very strong bond.  Using the latest technology to have complete market information and updated valuations, borrowers can be made to understand that their situations are often not as desperate as they thought – even if foreclosure has already begun.

****Underwater homes and strategic defaults are posing challenges to all segments of the servicing industry, but HARP 2.0 and other proposed rule changes mean that there still can be hope for borrowers.  Many will ride out equity shortfalls, once they are made to understand the real alternatives.  Most desire to maintain the single-family lifestyle for their families and realize that rent must be paid somewhere, after all.  Using technology and a deep understanding of borrowers’ situations to come up with workout arrangements that are palatable to borrowers and investors alike provide an essential strategy in reducing foreclosures.

****Enhanced servicing solutions from the special servicing community are making more than a dent in the foreclosure crisis – they are providing lifelines to borrowers desperate to maintain the family home and who are willing to explore every available avenue.  The problem will be with us for some time; there are millions of potential foreclosures to be dealt with.

****But foreclosure is no longer a foregone conclusion for severely delinquent borrowers, and investors are recovering value from assets that would have been thought worthless only a few years ago.  With today’s tools at our disposal, foreclosure should only be the last option when all other alternatives have been exhausted.

**By Tony Garritano**

***I’ve been talking to a lot of people about HARP 2.0. Will it help? Will it hurt? Will it have any impact at all? The jury is out depending on who you talk to. Regardless, Urban Lending Solutions, a provider of residential and commercial outsource fulfillment and settlement services to the mortgage origination and servicing industry, has shifted internal resources to provide more support to lenders and servicers that will capitalize on the new streamlined Home Affordable Refinance Program (HARP).

****“This is going to be a great opportunity for the nation’s homeowners,” said Mike Forgas, President of Urban Lending Solutions. “The new guidelines will allow more borrowers to qualify and this will lead to an increase in refinance activity. Banks may not be staffed to handle this increase and they are reaching out to qualified partners to help support and streamline the HARP 2.0 refinance process. We have been very successful supporting our existing clients with the HARP process.”

****The original goal of the HARP program was to allow underwater borrowers to refinance. However, strict guidelines prevented many homeowners who wanted to refinance from qualifying. Under HARP 2.0, these restrictions have been relaxed and the processing has been streamlined. Many industry experts expect the program to result in a wave of new refinances. However, industry guidance from the former GSEs has thus far been sketchy, leading many lenders to seek out professional support for their upcoming HARP 2.0 programs.

****“This is an excellent opportunity for banks to meet their annual corporate diversity goals at the same time they significantly expand their refinance business, if they partner with a qualified Minority Business Enterprise,” said Thomas “T.J.” Lewis, Corporate Diversity and Business Development Executive for ULS. “We have a proven team that is already working with some of the nation’s largest lenders and servicers and we are an MBE. It makes us a perfect choice for this program.”

****“Our experienced team of mortgage professionals will allow us to help our lender partners move quickly to secure this new business,” said Penny Nelson, Vice President of Mortgage Services Operations for ULS. “We have Urban University, and a dedicated training team that allows us to get our staff up to speed very quickly on the bank’s technology platform.”

**By Michael Hammond**

***If we think about it, iPhone started a micro-revolution in businesses by enabling access to data more easily and in visual contexts that were more useful than any mobile devices before it. It set the stage for an information-starved workforce that quickly realized a consumer product could provide fundamental information access benefits.

****On the heels of iPhone use in the enterprise, iPad has created an unexpected demand for Business Intelligence in the second hemisphere. Employees needn’t be classified as “mobile workers” to benefit from mobility and pervasive access to business intelligence. And BI vendors have been quick to validate these new mobility requirements, said a recent article called “iPad Creates Unexpected BI Demand, Workers Involved With BI Yield Tangible Results.” Using this strategy will enable you to be a more effective marketer and get more business.

****Deep down in the enterprise, there’s a movement that is tactifying the domain of BI which was previously isolated to strategic planning activities. Businesses – mostly mid-level managers responsible for operational performance – are reshaping the fabric of BI and the core definition of this term.

****A story in Computerworld magazine indicates that this strategy is paying off. It reports, that at 1-800-Flowers.com, users with access to real-time sales data created a quicker checkout process for fast-selling items, and likely reduced costs and increased customer satisfaction. Bobby Nix, director of BI and analytics at consumer services company Allconnect, noted a 26 percent sales increase in 2011?s first quarter to staff access to business intelligence data. The cause — it helped sales associates focus on the best sales opportunities. And the Cincinnati Zoo & Botanical Garden realized a 30.7 percent per-capita increase in food and beverage sales from October 2010 through the first quarter of 2011 that the director of park operations attributes to availability of BI data deeper in the organization.

****So, why aren’t more companies using BI to increase sales? The article says there is as a “reluctance by IT groups in general to embrace the democratization of BI, which underscores a general attitude in the IT community concerning the definition of BI. IT groups have a traditional view that BI must include a hefty dose of analytical processing, a task reserved only for “analysts” capable of making sense out of data. However, there are really two hemispheres of BI – one concerned with big data, analytics, and strategic objectives. The other BI hemisphere – the one used by companies in the Computerworld article — is kinder, gentler, and focused on performance indicators, micro-strategies, and delivering information that improves operational decision-making. This is a more tactical tilt to BI and in some regards, it suggests that there’s an ongoing evolution of how IT and employees view the separation of strategic and tactical information.”

****So, get working on your BI strategy. It doesn’t have to be that difficult and you can get big rewards.

**By Barbara Perino and Rebecca Walzak**

***Did you hear the one about the loan officer who, when attending a wedding, refused to tell anyone where he was employed for fear he would be asked to leave? All of us in this business have heard the jokes and suffered through the accusatory questions about mortgages from our friends and neighbors as they experienced credit problems, job losses and maybe even foreclosure. One of the most frequent accusations heard was, “Don’t you people have any integrity?”

****During the “happy times” of 2003-2007as these loans were being originated, some members of the profession were heard to ask similar questions of CEOs and production staffs. Unfortunately the most frequent response was, “If I don’t do these loans the guy down the street will. Why should I let him get the money?”

****Once the fall-out from the poor origination practices began, another integrity problem emerged. This time it was the signing of necessary documents by individuals to complete foreclosures and the surrounding practices that raised the specter of “robo-signing”. Because individuals signed attestation documents regarding the ownership and authority to foreclose, when that authority was not properly documented, the industry once again received a “black eye” when it came to integrity.

****This perceived lack of integrity continues because individuals who once disparaged loan officers and production staff for doing “anything for the money” are now doing the same thing themselves. As some of the alleged criminals that were active participants in straw-buyer scams, flip transactions and false equity skimming are brought to trial, there are members of our profession that willingly agree to speak in their defense. The testimony and written documentation that have been produced by these individuals are intended to convey the message that “These poor folks were just victims; didn’t really understand what they were doing or really were qualified if the right income was used” is heard over and over again in courtrooms across the country. The issue is exacerbated by the fact that they commonly present themselves as industry “quality professionals”when others are trying to make the point that this is not what our industry is all about.

****The apparent lack of integrity seen within many mortgage lenders, servicers, vendors, rating agencies and investment banks has come back to bite us hard.  Having emails read in Congressional hearings that described how little concern there was about the probability of these loans performing and the disregard for the impact failed investments would make on the global economy was not only embarrassing but denigrated our profession to one that is now trusted less than used car salesmen. Yet, as the new legislation and regulations that have been passed to try and force “integrity” on the business become reality, there is an outcry against these governmental controls. “Don’t tell me how to run our business!” we protest as we display charts and graphs that show how harmful these new requirements will be to us and, by the way, to the American public.  In reality, these charts and graphs are most likely true reflections of what is, and will, happen but who is going to believe us now. If we want to stop this, if we really want to run our business as we know how, then we have to prove that the lack of integrity that got us into this mess no longer exists.

****What Is Integrity?

****Webster defines integrity as “total honesty and sincerity” or “lack of defect.” From the perspective of how individuals behave when they have integrity it can also be thought of as “conduct that conforms to an accepted standard of right and wrong.” Integrity involves the three R’s: Respect for self; Respect for others; and Responsibility for all your actions.

****From the perspective of these definitions lenders with integrity are looking first at what their customers expect, what they need and using the tools and knowledge at their fingertips to help make value-added decisions. Whether those decisions ultimately mean the business walks away from a loan in the case of a consumer or doesn’t invest in a pool of loans if the customer is looking for good investments for portfolios. It is not sufficient to “say” this is what we do and don’t do” or to have policy and procedures manuals that describe how to ensure integrity in the process if the process is never followed or there are no ramifications when this oversight is discovered. For an industry to have integrity, the companies that are part of the industry must have integrity. For a company to have integrity the people and products produced must have integrity and that means that people have to be totally honest and sincere and the products are without defects that would support that fact.

****The Journey Back

****Rebuilding the integrity of the industry is a difficult task. The perceived lack of integrity in this industry is not something that can be overcome with a media blitz or the settlement of a law-suit. It takes time and consistency; a demonstration of commitment to doing the right thing for both the consumers and the investors. Our conduct in how we present ourselves to customers. How quickly we adapt to the new realities of the emerging regulatory environment will be viewed by those we have most damaged as leading indicators of what to expect in the future.  .

****Of course, individually we have already taken the first difficult steps and have come a long way in dealing with this problem, particularly with loan officers, production staff, external vendors and consumers who would focus on perpetrating fraud on lenders and banks. Investors now have exclusionary lists; individuals whose participation in fraudulent activities and/or have demonstrated a lack of integrity that has been so detrimental to the industry are no longer able to practice the profession. The SAFE Act, requires that those individuals who are actively involved in making decisions regarding loan applications be licensed and have the education that comes with obtaining it. The Mortgage Bankers Association has developed and posted a Code of Conduct on their web-site and are screening those companies and individuals who seek to be members.

****While all of these individual steps are important, the industry itself has larger industry-wide issues to address.

****The first is to kick out those who promote bad lending practices. Industry leadership needs to step forward and actively stop allowing any “slip” in conduct that is not what we promote as the accepted standard of right and wrong. We can all think of individuals who in the past have positioned themselves as industry leaders but have only led us into promoting destructive loan programs anddetrimental lending practices. Yet after they took the money and ran, leaving the rest of us to deal with the fallout, they are once again beginning to resurface with new companies and new programs. These people have proven they have no integrity and should be shunned from the industry. We need to send a message that the kind of behavior that is associated with these individuals will no longer be tolerated by the industry

****Next, we have to stop believing that inferior products are acceptable. Even today we have no standards for what is acceptable when it comes to the end loan product. While there are many who would argue that repayment of the debt is sufficient demonstration of the quality of the product, the reality is that once the loan is funded, we have little if any control over whether or not it pays. Strategic defaults are just one example. This issue is demonstrated over and over by Due Diligence processes that reflect the findings of any number of individuals hired to review files and “find the problems” when these individuals themselves may have no training or knowledge to do so. We need a method to validate the relationship between the process and its underlying activities and the impact to how the loan performs. Lenders who don’t worry about such things as policies and procedures should find that their loans are either rejected in the secondary market or priced at levels that prohibit profitability in order to allow lenders with integrity to make a positive statement about the products they produce.

****We must stop using vendors who are known to have been involved in stretching values or providing other types of bad information. They must be required to demonstrate their ability to manage and control their products and organizations to ensure that the results meet the highest standards. Whether it is vendors that produce appraisals and credit reports, vendors who provide contract underwriters or “quality” reviews or realtors who want to “help” clients with the sale of their property, we can no longer afford to be seen as tolerating relationships that harm us or our customers.

****Finally, and probably most importantly, we have to set higher standards and hold ourselves accountable. Leadership sets the tone for the organization.

****There is a common theme among experts who have studied or written about modern leadership, that all leaders must act with integrity at all times. The first reason for acting with integrity is that employees are constantly observing the leadership team. A leader is the role model by which the employees are most influenced. Eventually this will lead to a modeling of the group’s behavior. This is why a leader must have and maintain the highest standard of character and integrity in all company decisions. Without integrity the leader can never garner the respect and confidence of the employees.

****Individual integrity is never easy, and is never suppose to be. At most it may be the most difficult of all personal qualities to hold intact because of its complicated nature and the multiplicity of it dimensions.

****One part of integrity is virtue; this can be considered the courage that a leader must possess as part of their integrity. This represents one’s focus and the endurance required to stand up against something that is deemed to be wrong, unjust or corrupt. Succumbing to these types of pressures will eventually cause the leader to take shortcuts in order to accomplish a goal and then, history repeats itself. Loyalty and trust by the leadership team and the staff must be the ultimate goal for continued success.

****”No one can be happy who has been thrust outside the pale of truth. And there are two ways that one can be removed from this realm: by lying, or by being lied to.” Seneca Roman philosopher and writer

****We must also consider educational requirements for mortgage lenders. We would never use an unlicensed doctor, dentist, accountant or financial planner. Yet borrowers have to trust the most sophisticated financial transaction to someone whose knowledge is unknown to them.  Even realtors are licensed!

****Today’s educational and certification programs leave a lot to be desired in terms of value and completeness. The education of lenders by lenders can become a practice of transmitting bad information. These education programs need to be professionally developed, taught and result in recognized and accredited degrees.

****Finally, we need to educate our customers, both the consumers and investors as to what a lender with integrity does, how they do it and have some accepted measure to substantiate these claims. A well-known and accepted consumer advisory company that can evaluate and rank any lender’s ability to fulfill the commitments they make to consumers would go a long way toward overcoming the perception of mortgage lenders held today. But in order to do this we must first educate our consumers and our investors. They need to understand what those critical processes are, how they work and how companies ensure that they are done properly. This education process can only occur once we make that determination and develop and/or strongly support those who undertake this task.

****Once all of this is in place we can begin the communication process. With the emergence of social media as a mainstay of the generations looking to finance homes in the future, we have multiple resources to convey a strong message about the trustworthiness of our industry and eliminate the distrust that threatens to destroy the American home financing system.

****Taking this journey will not be easy. We have to give up some long hold beliefs and reject assumptions that have been the foundation of some careers. However, at the end of this journey we will have a well-respected profession that is recognized for its integrity and honesty in dealing with consumers, investors and each other.

****ABOUT THE AUTHOR: Barbara Perino is a Certified Professional Co-Active Coach guiding her clients who are executive leaders and their staff. Barbara has been trained through The Coach Training Institute (CTI) located in San Rafael, CA. She completed a Coaching Certification Program through CTI and the International Coaching Federation (ICF). Prior to becoming a coach, Barbara was a 16-year veteran of the residential mortgage industry in a national sales management capacity for property valuation and residential mortgage service providers.

****ABOUT THE AUTHOR: 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 having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

**By Ravi Ramanathan**

***Improbably there is a positive side to the rough ride the mortgage market has taken in the past few years. It’s not easy to find a silver lining in the cloud of record defaults and foreclosures that have hung over the market the past three to four years. The good news is the loan level data collected in the servicing of defaulted mortgages can provide key insights into foreclosures: notably, how to predict the likelihood of foreclosures based on loan parameters, the timelines involved and how to head them off in the future with safer underwriting criteria.

****DecisionReady has collected activity level information from more than three million loan reviews by default servicing associates. The data we have can be used by servicing organizations to identify intelligent metrics on loan performance by a variety of factors, including loan characteristics such as geography, and investor and property type.

****What conclusions can be drawn from the data we’ve assembled? How can this data be used?

****First, we’ve found the data on defaulted loan performance share some common patterns, which can help pinpoint some of the top reasons that lead to a loan default and foreclosure. We’re also able to determine some common factors associated that lead to better decisions on whether a foreclosure sale date should be postponed. The data we have collected provide critical insights into how the past behavior of homeowners is a leading indicator in predicting future loan performance.

****The increased scrutiny of servicers by both internal and external auditors has resulted in an abundance of loan level data that not only allow servicers to identify and drive process and policy changes, but also provide key insights into the performance of loan portfolios. All this has emerged from the development of managing policy and process compliance in mortgage servicing through technology. The market dynamics provided the impetus to collecting detailed data, and technology provided the means to do so.

****Prior to the subprime crisis, origination and servicing compliance was associated with document gathering and the timely disclosure and execution of terms and notices. Today, compliance must ensure that the subjectivity of decisions by bank employees is replaced with more objectivity. Thus, compliance has been layered with a process-based component. Much of the compliance process used in the past was based on a snapshot of loan file data. We’ve learned that process compliance is just as important as document compliance in dealing with today’s regulatory environment.

****Servicing technology such as ours collects data on each loan we review, including all attempts by the servicer to reach out to borrowers and the loan decisions made throughout the default servicing process. This transactional activity level data can be mined and analyzed to identify intelligent metrics on loan performance, using a variety of parameters.

****The data collected in the process of servicing defaulted loans allows services to identify and drive process changes through their organization. Importantly, the data also provides key insights on portfolio performance. Servicers can combine third-party market and economic data with their own data, creating powerful business intelligence for management’s future decision-making.

****Meeting The Rules

****Investor guidelines concerning critical servicing decisions are often ambiguous, requiring a good deal of interpretation from servicers and servicing associates. For example, guidelines requiring “sufficient customer outreach” can be interpreted in many ways. Servicers need to formulate a process to effectively address the compliance rules. Technology can break down these complex decisions into a series of simpler steps and objective questions for servicing associates, thus eliminating any ambiguity. It also can provide servicers with opportunities to mine this data for use in anticipating borrower behavior.

****Servicers can review the performance and outcome of loans based on their interpretation of policy from the transactional data collected. They can mine and use this invaluable data to identify all available alternative options to foreclosure when servicing delinquent mortgages. If foreclosure cannot be avoided, the data can help servicers establish foreclosure sale dates.

****A New Era

****Today, loan level electronic documentation is required to prove beyond a reasonable doubt that servicing associates followed the policy and process guidelines. It is no longer possible to establish compliance with training guides and processing manuals. The scrutiny of servicer decisions by external and internal auditors has led to the creation of the electronic documentation of the servicing process and the document trail. Therefore, opportunities to collect and interpret loan level data will only increase.

****Servicers have developed more stringent processes given the new regulatory dynamics, enabling them to collect data on associate productivity at the loan level. Servicers then can review and compare data between associates across different sites and different departments, allowing for better capacity planning for their operating units. Servicers can gain more insight into the productivity of their associates and into how geography, investors and loan types affect their servicing costs. Servicers now can have more meaningful conversations with investors on the cost of servicing, as well as on portfolio performance.  

****One of the more significant challenges servicers face in managing delinquent loan and foreclosure timelines is finding a balance that accommodates the diverse views of borrowers, investors and regulators. The underlying data can help manage this delicate balancing act. How servicers interpret subjective compliance decisions can have a significant impact on portfolio performance.

****For example, most investor guidelines allow a servicer, under delegated authority, to postpone a foreclosure sale date if the borrower is engaging in an “active workout” of the delinquent loan. But what constitutes the definition of an “active workout,” including any exceptions that need to be noted for a waiver, is critical in determining whether the foreclosure sale date postponement will be considered.

****In several states, a foreclosure sale date can only be postponed if the entire foreclosure process is stopped and subsequently restarted. Such a move not only is costly, but also results in prolonged foreclosure timelines. Analytics based on the data mined from a servicing portfolio can assist servicers in making such important and consequential decisions.

****Better Underwriting

****Data collected from process compliance procedures during default servicing provide crucial information on the true costs of default servicing. The actual asset risk profile of the servicing portfolio can be determined by applying analytics to the data. This data can help ascertain the key components for establishing accurate loan pricing on new originations as well as provide a basis for evaluating the threshold accuracy of traditional underwriting criteria, such as loan-to-value (LTV) and debt ratios. Origination and servicing loan data can be combined to validate and shape loan underwriting rules and guidelines.

****Technology has enabled servicers to meticulously track their processes and documents, which has yielded invaluable data on loans and loan performance during a very turbulent time for servicers. This information has provided servicers with insights to delinquent borrower behavior and helped them fashion home retention and foreclosure timeline procedures and strategies.

****ABOUT THE AUTHOR: Ravi Ramanathan is president and CEO of DecisionReady Solutions of Irvine, California. The company builds solutions that assist servicers, investors, and regulators through process-based compliance.  DecisonReady’s technology helps restore general market confidence in servicing processes and process conformance of delinquent assets.  Ravi can be reached at Ravi@DecisionReadySolutions.com.

**By Sanjeev Malaney**

***With every crisis comes a potential opportunity. The 2008 financial crisis caused professionals and many businesses in all industries to rethink the way they were doing business across the board. Anytime that kind of shakedown occurs, changes are needed to get back on track by boosting efficiency and restoring profitability. This has been especially true of the mortgage industry. With the demand for change in the industry over the past three years came the motivation to create and adopt new technology such as software as a service (SaaS) to enhance business operations. 

****Historically in the absence of solutions that addressed not only the targeted mortgage application needs but also the high security and scalability requirements of organizations, it was easier for a mortgage company’s IT department to create, run and maintain platforms internally. For many of these companies, a quick fix from the technology department was the safe bet, but not necessarily the best in the long term.

****Advanced Tech

****However, in recent years, there has been a demand for more advanced technology that facilitates transparency, better communication and process automation across all sectors in the mortgage industry. The result has been the creation of end-to-end Web-based systems, movement in mobile innovations and platforms that control workflow at the touch of a button. As technology vendors further increased the security and scalability features of their SaaS solutions, larger lenders took notice. Although some lenders did implement SaaS prior to it becoming mainstream, those that are now adopting, have the advantage of more advanced offerings- thus gaining more process efficiencies required to be competitive. And, with the constant technology cycle of innovation, now is the time for those early adopters to revisit SaaS and recognize the benefits delivered by vendors today.

****For those that have yet to adopt SaaS technology and are toying with the idea of in-house development, it would be wiser to work with a cloud-based solution provider. Even by starting with packaged applications and building and integrating them into an internal system, the company risks investing significant time and money in developing a solution that may not perform to their standards in the end. Eighty percent of all IT projects fail due to the uncertainty of the end result. SaaS guarantees a return on investment (ROI) by reducing technology maintenance costs, decreasing loan turnaround times and improving efficiency across organizations.

****Use The Cloud

****What you can do above and beyond in the cloud:

****SaaS creates possibilities that are only achievable in the cloud. At this point you may ask, “What can I do in the cloud that I cannot do in my own data center?” With SaaS, staff and strategic partners can now collaborate seamlessly across organizational boundaries. Networking clients and partners together through the cloud in a secure way is now a reality with a neutral party acting as the network. Lenders are constantly communicating with third-party title insurance agents, investors and accounting departments and continually exchanging loan documents through email and snail-mail. But with the right SaaS application, the information is housed in the cloud and all loan transaction participants can work on documents in real-time without organizational constraints. The cloud enables collaboration as if your partner is part of your enterprise.

****More ROI

****There are additional benefits of a hosted cloud-based system not commonly considered. As mortgage companies are adopting more advanced and mobile technologies, those using SaaS systems gain the agility to easily create new mortgage products, enhance business efficiency and differentiate themselves with superior and responsive customer service. Cloud-based solutions also help companies alleviate the significant compliance headaches. With building a technology system internally comes the heavy responsibility to adhere to industry and government regulations and requirements. With a hosted system, the service provider is responsible for meeting guidelines thus alleviating the compliance burden. Lenders should thoroughly vet service providers to ensure all necessary data security and other compliance certifications are in adherence.

****Although software can be purchased that is deemed compliant and allows lenders to run compliance checks themselves, they run the risk of overlooking additional data center operating issues and underlying subsystems (operating systems, databases software, etc.) compliance issues. Lenders should rely on a vendor who can ensure systems, subsystems and operating procedures meet compliance needs. But many companies are missing out on this level of innovation because they are hung up on old ideologies that discourage them from adopting SaaS.

****Misperceptions

****Myths preventing SaaS adoption:

****There are several misconceptions surrounding SaaS, including that the platform is less secure than housing data internally. This simply is not the case. There are many challenges to housing a system internally, such as making sure that you have strict procedures on how you manage the development, deployment and operation of the software, taking full responsibility for maintaining data, physical and network security, choosing the right data center and ensuring regular audits.

****Lenders housing their own internal systems must also cope with a growing variety of outdated legacy systems that may not have up-to-date security standards. These older systems are more susceptible to hacking than companies with modern technology and heighted security measures. IT departments are often required by budget and talent constraints to maintain older systems even though it is clear performance, key features, security and compliance may be lacking, while modern SaaS systems make certain that a lender’s underlying system are current with security patches to ensure data protection, security and compliance.

****With security as a top concern, SaaS providers’ standards and methods for protecting valuable data are transparent and can be easily evaluated and scrutinized. It is essential for mortgage companies to ensure standards of a SaaS provider are higher than what they are able to sustain internally, therefore justifying the partnership. SaaS users should look to verify that vendors are compliant and choose those who hold SAS70, SAASE 16 and OTC audit certifications among others.

****Yes, It Scales

****A second myth is that SaaS is not scalable. Hosted technology solutions are dynamic and can typically be customized to meet any business’ needs. Clearly, smaller organizations do not have the same needs as a top tier lender but SaaS technology can be easily adjusted to handle fluctuating volumes and can be modified much faster than internal systems. Typically, if a lender drastically increases or decreases volume and outgrows its current technology, significant time and money needs to be dedicated to a system conversion. With a hosted platform, the lender instead can easily request its provider to control capacity levels and features in order to meet the growing demands. Unlike your single organization, the vendor you are working with is building the technology needed to accommodate a wide-range of mortgage companies’ needs consequently designing highly customizable, scalable systems.

****Cost To Own

****The final SaaS myth is that cost of ownership is greater than traditional solutions. Adopting SaaS technology enables users to forego costs associated with building and maintaining their own system. Trying to reinvent the wheel is unnecessary and quickly becomes costly. Lenders must rethink the decisions made in terms of their IT investments. The lender is also able to rely on the expertise of its provider to quickly and accurately make these changes instead of pouring the capital into maintaining an in-house IT department. SaaS solutions cover the range of IT and operations resources that go beyond the simple provisioning of software and let lenders reduce cost and expertise needs for data center operations, subsystem maintenance and the like.  Therefore it is a wise decision to put your resources into readily available, extremely robust SaaS technologies to enable your company to focus on the core competencies that directly impact revenue.

****SaaS is not just about ROI, but also mitigating the likelihood of failure. SaaS gives users the ability to try it out without a massive up-front investment with minimal risk. SaaS also delivers peace of mind, keeping users from constantly wondering if in 12-18 months the company will experience a successful roll out or be dealing with a failed attempt. With a hosted platform, you can make the changes as you go and continually improve the system.

****The reality is that security is actually enhanced when operating in the cloud, technology models can be more easily tailored to a mortgage company’s changing size and unique needs and the total cost of ownership is reduced. And, a growing number of successful lenders are leveraging SaaS technology to gain strategic advantages while others are stuck using their own internal systems or falsely believing the myths. As the outlook for 2012 remains unclear, mortgage companies should be prepared to manage an ever-changing regulatory landscape adapt to any changes that come their way. Correctly chosen SaaS solutions give lenders the tools to be agile in responding to marketplace needs, whether they are technical, capacity, compliance or feature driven.

****ABOUT THE AUTHOR: Sanjeev Malaney is co-founder and chief executive officer for Capsilon, a provider of cloud-based document sharing, imaging and collaboration solutions for businesses. Capsilon’s technology facilitates both internal and external collaboration by connecting virtual workspaces and enabling transaction participants to work together in real-time, reducing the time and cost associated with paper and electronic alternatives. For more information visit the company’s website at www.capsilon.com.

**By Sharon Matthews**

***For consumers, obtaining a mortgage is often a complicated and difficult process – full of requests for more information, forms, legal documents, unfamiliar requirements, signatures, and unknown parties. It’s not just a transaction between a home buyer and a seller. There are realtors, banks, appraisal companies, inspectors, lawyers, insurance companies, and settlement agents involved. Knowing who to trust and what to do is hard. That’s why having a relationship, or developing a relationship, with a bank is so important. If a consumer learns to trust the bank involved in their mortgage transaction, because the bank makes the process simple and clear, they can go on to have a long-term relationship involving other products and services.

****The mortgage industry is stressed by constant change and new legislation. Changes necessitated by RESPA are in effect and new changes are already on the horizon. The Dodd-Frank Act has led to the emergence of a new Consumer Financial Protection Bureau that will shape new regulations and mandates. To simplify the mortgage process for consumers, the bureau has already begun consolidating the TIL and GFE disclosure forms into a single document – something that will affect every mortgage lender.

****At the heart of these changes and legislation is improving the information provided to, and therefore the experience of, consumers. Lenders that embrace this philosophy and find ways to gracefully deal with compliance, security, and efficiency issues will realize a competitive advantage.

****Ease Compliance Burdens

****Non-compliance with regulations around consumer interactions can result in delays, penalties, and rework. According to an article by Bloomberg, the time needed to close a mortgage loan has nearly doubled to 60 days. It’s critical that lenders find ways to reduce this lag time and get to the closing table in a quicker fashion. We’ve found that automated tools to manage document-intensive processes, with reporting and compliance capabilities, are key.

****eLynx’s electronic delivery, signature, and print-and-mail fulfillment services streamline processes and are compliant with regulations like the Housing and Economic Recovery Act (HERA), as well as the Real Estate Settlement Procedures Act (RESPA). In fact, these integrated services  ensure disclosure packages are delivered securely and immediately, remaining in compliance with time-based regulations and with ESIGN and UETA regulations for electronic signatures. Not all states, however, have adopted the legislation, so we took things a step further, validating our compliance measures through multi-state audits.

****Realizing that not all consumers have e-mail addresses and that some chose to not receive documents electronically, eLynx’s integrated print-and-mail services provide a failsafe solution. If a borrower fails to pick up the documents in the allotted timeframe, this service automatically takes over, delivering hardcopy disclosures within RESPA timeframes. The model of “send it and forget it” is important to your compliance measures and ultimately your peace of mind.  Regardless of the circumstances after electronically sending disclosures, you can be assured that the intended party will receive them.

****Consumer Trust

****Studies show that implementing electronic mortgage processes is a strong, sustainable investment: Lenders who provide customers with web-based services tend to promote customer retention and increase their ROI, but most importantly, the security enhancements that come with electronic processes can’t be matched. 

****For consumers, knowing that sensitive data is protected is critical. Since 1994, eLynx has protected customer data and has ensured that your customers’ data is secure. Our electronic offerings are far more secure than the average email, as well as mail by post.  

****Before customers can access the documents sent electronically, they must first establish their identity.  We offer several methods for identify authentication including out of wallet questions, Knowledge-Based authentication (KBA), and username/password schemes. The customizable security offering confirms a borrower’s identity before they see the contents of packages sent to them.

****Furthermore, our robust audit trail time-stamps documents and records every event and action taken in the system.  The feature provides a level of transparency for lenders so they can see where borrowers are in the process, who has taken action, and how documents are changing. This is a much more secure method than wondering if the mail was delivered to the consumer, where the lost document is, and trying to figure out who has the latest copy of a mark-up document.

****Efficiency & Empowerment

****Speed and service are important, and lenders need tools and workflows to maximize operational processes and profitability. A recent eLynx analysis of workflows for sending documents to consumers revealed several best practices that affect efficiency. For example, having the generation of disclosures disconnected from the application process, or performed by a different group, can lead to issues. Consumers who had recently spoken to a loan officer or someone at the call center had no reason to trust an email notification from an unfamiliar person and email address. This frequently led to staggering delays. Automating the mortgage workflow, so that loan officers or call center staff were empowered to send documents immediately had a measurable impact on the process.

****Furthermore, the research showed that getting a borrower to sign the upfront disclosures electronically has a significant pull-thru effect. Additional analysis has shown that electronic adoption can shave up to 12 days off the average time to close a loan. Direct involvement with consumers, use of electronic tools, and workflow improvements empowers both parties to know more and be active in the process.

****The eLynx electronic delivery and signature offerings were designed with consumers in mind. The user interfaces incorporate lender branding to provide consumers with the familiarity needed to move processes forward. Whether electronically, or paper-based, our services will automatically meet the needs of consumers and get documents where they need to be on-time. The enhanced visibility and transparency that is given to both parties allows bi-directional communication. Everyone knows where documents are in the process, who has them, and how they have changed. Our tailored notification system lets each party know when action is necessary to strengthen the trust between lender and consumer, as well as significantly shorten process time.

****The Next Generation

****eLynx is currently investing its energies in a new offering that will provide a single streamlined, integrated, and intuitive experience for the consumer. This offering, aka Consumer Inbox, will automatically include services such as integrated print and mail. The Inbox will improve communication and document exchange between lenders and consumers. Consumers will be able to receive documents electronically, then sign and return them using an intuitive interface. Consumers can also use the system to respond to requests for additional information from the lender for documents such as W-2s and income verification. Looking to the future, the Inbox may be offered on mobile devices to make consumer interactions as simple and convenient as possible.

****Using technology to improve interactions with consumers is an effective strategy for a mortgage lender. The immediate benefits of process efficiency, greater transparency, elimination of lost documents, improved compliance, and enhanced security are achievable. And lenders that use technology effectively will get a competitive advantage by cementing a solid relationship with their borrowers. It’s no longer a question of if you improve your customer experience, but how you go about it and how fast you can see results.

****ABOUT THE AUTHOR: As President and CEO, Sharon Matthews oversees the overall operations of the company and is responsible for the growth of eLynx’s market leadership position providing data-driven document distribution, collaboration, and connectivity services for the financial services, mortgage banking, and real estate industries. Matthews came to eLynx with more than 25 years of senior executive experience running profitable large technology and software companies. Under her four-year leadership at Solectron, an electronic manufacturing services business, she re-engineered the multiple sales organizations into a single cohesive whole and then applied those principles to successfully run a profitable $1.7 billion business unit of large corporate accounts in the Computer Sector. Prior to her role in Solectron, Matthews was the CEO of UCMS, a global customer relationship management outsourcing business with operations in the U.S. and Australia.

**Taking Paperless Further**

***As we talk more and more about UMDP, the idea of being more data driven arises. Investors are literally forcing lenders to get with the program and embrace the data. The fact is that during this transitional period lenders will rely on imaging for now. As a result, vendors have to come up with imaging tools that can help lenders more toward a data-centric process. For example, PROGRESS in Lending has learned that Blueberry Systems LLC has enhanced its enterprise-scale document imaging solution, Manifest, to include an advanced package viewer, providing users with a more dynamic solution to further automate image-enabled workflow.

****Manifest enables users to easily capture documents and store them as part of the core loan record. The solution can function as a stand-alone service or be integrated into the production workflow. The package viewer was developed to work with Manifest to enhance the viewer’s experience, ensuring images are dynamic and easy to navigate and utilize.

****Blueberry Systems’ package viewer allows users to define specific sets of documents within a loan and easily determine who views particular documents, the order in which the documents are viewed and ensure the most relevant documents are presented to each person in the workflow. In addition, business rules can be set to determine the documents that are required in a package and which documents have to be approved in order for the loan to continue forward. This customizable document presentation solution enables Blueberry Systems to provide a more natural, human approach to the way people work with imaged documents.

****“This package viewer presents indexed documents that can be streamlined directly into the workflow,” said Lloyd Booth, president and COO of Blueberry Systems. “We can dynamically create pre-sorted components at any number of points in the process, ensuring that validated, critical docs are included. Manifest automates the packaging, delivery and presentation.”

**By Tony Garritano**

***In recent weeks we’ve heard about a few acquisitions. My guess is that we’ll hear about more going forward. The market is tough and the weak are getting acquired by the stronger companies that are better positioned to become the next industry leaders. For example, PROGRESS in Lending has learned that TD Service Financial Corp., a provider of services to the mortgage industry, has acquired Security Connections, Inc. Here’s the scoop:

****The Idaho Falls, Idaho-based company provides outsource solutions to the mortgage banking industry. It will operate as a wholly-owned subsidiary of TD Service Financial Corporation, Inc., and retain its brand identity. Going forward, the firm will market itself as ‘Security Connections, a member of the TD Service Financial Family’.

****TD Service Financial Corporation, through its TD Service Company subsidiary, provides specialized services in the areas of default, lien release, assignments, and document retrieval through the use of custom software. Another subsidiary, Trustee’s Assistance Corporation, provides posting and publishing services.

****According to Dale L. Dykema, who started TD Service Company in 1964, the acquisition of Security Connections allows his company to offer an entirely new line of business.

****“This integration should represent a particularly compelling value proposition for our mortgage banking clients,” says Mr. Dykema, who still serves as TD Service Financial’s CEO and Chairman. “Because there’s such a natural fit for Security Connections’ services, I believe the whole of our combined company will represent more than than just the sum of its parts.”

****Security Connections offers a comprehensive line of file management services aimed at the mortgage banking industry. Focusing primarily on document imaging, long-term record storage and full service post closing solutions. In addition, the firm provides assignment processing, document retrieval, and lien release processing.

****“Operating under the larger TD Service Financial Corporation umbrella will allow Security Connections to reach a substantially larger marketplace,” said Karleen Maughan, the company’s founder. “More than that, the strength of our combined companies will provide access for their customers to additional lines of services.”

****In addition to TD Service Company and Security Connections, California-based TD Service Financial Corporation is the parent of TD Service Company of Arizona, TD Service Company of Washington, and Trustee’s Assistance Corporation. The firm was recently awarded the LPS Default Solutions Performance Excellence Award, and has been top-rated since 2009.

**By Kerri Milam**

***In this age of bright shiny devices, 140 character messages and a daily fight for relevance via the search engines, our marketing strategies tend to become nearsighted. Are we blogging enough? How do we rank on Google? What are our organic rankings versus our ad word rankings? Have we set our website’s conversion rate goals? How often and where should we run our banner ads? To Tweet or not to Tweet (or perhaps just Retweet), that is the question.

****Thinking this way about marketing or reputation management – the stringing together of tactics in knee-jerk response to whatever is trending at the moment  – rarely results in an effective strategy. You may gain ground initially and be lured into a false sense of competence because your tactics are “working.” But can they be counted on?

****Indeed, your tactics may be “working,” but are they cohesive and sustainable? Will the effort and investment that your business makes in marketing and PR tactics this year continue to build momentum or will they flash brightly and flame out?

****With the benefit of 25 years’ perspective in business marketing, I find the distinction between merely executing a marketing plan and truly succeeding with a marketing plan is in commitment to multi-faceted strategy and the elevation of The Big Idea.

****In the absence of strategy and The Big Idea, I lack faith in tactics. There, I’ve said it.

****You can Tweet until the cows come home, blog religiously, optimize your website and have 500 connections on Linked In, but if you undervalue vision and blunt creativity with a tactical, checklist-centric marketing effort, your achievements will be temporary.

****Don’t get me wrong, I have encouraged the businesses I work with to embrace the Internet as a marketplace for a half-dozen years. I believe in smart website design, search engine optimization, blogging, and appropriate virtual (social) networking tools. I’ve watched businesses emerge from obscurity by using these tools.

****However, businesses that can stand the test of time by remaining consistently visible and held in high regard by their market establish strategy as the foundation and show respect to the underestimated value of The Big Idea.  If you’d like to know more about The Big Idea or creating effective marketing strategy, drop me a line or just pick up the phone at call me at 404.378.0850.

**By Tony Garritano**

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

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

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

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

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

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

**radius financial group inc. Profiled**

***With LO Comp, UAD, UMDP, Dodd-Frank, and all the rest, what is a lender to do? Well, of course, they have to automate more. But beyond just turning to technology, lenders need to and are demanding more flexibility from their vendors. For example, PROGRESS in Lending has learned that radius financial group inc. has chosen MortgageFlex Systems, Inc. for their loan origination needs. Here’s why they decided to go with Mortgageflex:

****The hosted LoanQuest system selected includes the enterprise-level loan origination system and a Web Consumer portal that allows consumers immediate access to loan status.

****“Our business needs required a system that is flexible enough to conform to our origination workflow requirements, not the other way around. LoanQuest proved that it was versatile and could be adapted as needed without significant programming resources,” stated Keith Polaski, principal, radius.

****“We understand radius’ business requirements and are confident we will meet and exceed their needs,” said Craig Bechtle, chief operating officer, MortgageFlex. “We’re looking forward to a long and beneficial partnership.”

****radius required a cost effective system that could be tailored to their specific needs. MortgageFlex met those requirements with a hosted option that is an exception among the “cloud” offerings in that each client has a distinct instance of the application and their own unique database in a secure, SSAE16 certified facility.

****This unique arrangement gives customers the flexibility to adapt the application without restrictions. This was a core requirement of radius’ LOS selection criteria.

****“Not sharing application code gives customers the advantages of premises installation without the hard costs,” said Bill Black, chief information officer, MortgageFlex. “We focus on providing the customer a secure and highly-available platform so the customer can focus on their business.”

****Customers have the ability to add fields as needed without programming, control and monitor workflow activities, and drive system performance using integrated business rules.

****MortgageFlex offers several hosting options, including transactional and SaaS. The transactional option allows lenders to “pay-as-used” on a per loan basis and is very beneficial for lending organizations that do not have technical infrastructure and support readily available. Hosted options also give lenders high levels of security with SSAE16 certified facilities and full Disaster Recovery sites.

****radius also required a system that could integrate easily with existing Xerox Blitz Docs software being used for e-signing and e-delivery. An established system-to-system interface with Blitz Docs has been in place for LoanQuest users for some time.

****“We are proud of our partner network and have been very deliberate when selecting our business partners. A strong partner is invaluable and can expand system capabilities exponentially,” Bechtle stated.

****Founded in 1999, radius financial group inc. is a full-service mortgage banker specializing in residential, commercial and private financing. Since its inception, radius has experienced year over year revenue growth, despite the recent credit and housing crisis, and was recently recognized by Inc. Magazine as one of America’s fastest growing companies in 2010, ranking #554 in the Inc 500/5000 list.

**By Joseph Badalamenti**

***Field service companies must demonstrate the ability to handle both quantitative (volume) and qualitative (depth of service) market demands. Meeting this dual-track challenge requires a large, nationwide field service team ? the key to rapid deployment of field resources on a neighborhood-by-neighborhood, property-by-property basis. Providers who can perform at this level are re-defining responsive REO service.

****Occupied Property Management: Leading field service companies can determine occupancy, evaluate state redemption guidelines and provide a full range of document delivery, signature execution and related borrower contact services. Qualified field service providers can also save their clients time, money and administrative headaches by assuming full REO property management responsibilities, including services such as cash-for-keys exchanges; eviction coordination; utility, property tax and insurance payments; and rental lease management, including payment pickup.

****Pre-Marketing: With in-depth, experience-based knowledge acquired before a property becomes part of the client’s REO portfolio, providers offering both pre- 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 turnkey auction management or assigning a broker, as appropriate.

****Marketing: Field service providers who can offer comprehensive property marketing services are helping REO properties return maximum market value in minimum time. Qualified providers can mount complete marketing campaigns, provide detailed monthly marketing reports, and assume full responsibility for broker monitoring/evaluation.

****Closing Services: Well-qualified field service 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 services and more are well within the scope of today’s best-qualified field service organizations.

****Benefits of Pre-Foreclosure/REO Integration

****Servicers are experiencing a number of benefits as they strengthen relationships with field service companies capable of working effectively across both pre-foreclosure and REO fronts. Our clients, for example, are seeing:

****>> Reduced costs. Lower commissions, economies of scale, and stronger control with fewer compliance problems deliver substantial cost savings.

****>> Shorter asset resolution cycles. Property-days-on-market for Five Brothers-managed brokers is 30-90 days.

****>> Smarter property marketing management. Knowledge of the property and the neighborhood leads to smarter valuations and more productive selling strategies.

****>> Clearer lines of accountability. Five Brothers monitors and manages broker activities on an individual property basis.

****The Path Forward

****Improving and streamlining default and REO processes will remain a primary focus of servicers and their field services partners as elevated foreclosure rates continue and 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.

**By Tony Garritano**

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

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

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

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

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

**The Latest Promotions, New Hires And Layoffs**

***The Mortgage Bankers Association has completed the transition, announced in September, and will resume support for the Mortgage Industry Standards Maintenance Organization, Inc. (MISMO). With the successful transition, MISMO will now focus efforts on regulatory implementation and advocating for broader adoption of data standards throughout the industry. As part of this news the MBA has made a new hire. PROGRESS in Lending has also learned of a promotion at Urban Lending Solutions. Here’s the details:

****“MBA supports greater efficiency and lower costs throughout the industry by advocating for broad adoption of industry consensus standards developed by MISMO. We are actively engaging both regulators and industry in this effort,” said MBA President and CEO David H. Stevens. “MBA will also provide educational opportunities aimed at helping industry and government better understand and implement MISMO standards. Standardization and transparency are critical to the return of investor confidence and liquidity in the mortgage marketplace, and MISMO has a crucial role to play. I would recommend that MBA members become MISMO subscribers in order to help guide this effort.”

****To assist with these efforts, MBA has hired Cindy Bojokles to be its Director of Industry Standards. In this role, Bojokles is responsible for supporting and advancing the activities of MISMO. Bojokles will work closely with industry executives to increase the standards available to the industry. Bojokles will also help government agencies understand the benefits of adopting the voluntary consensus standards developed by MISMO.

****“Cindy has spent over 15 years working on data standards, data quality and business solutions for the mortgage industry. Her detailed knowledge of technology and business processes will prove invaluable to MBA and the mortgage industry as it continues to advance MISMO and industry standards,” said Stevens.

****Kudos to the MBA. Let’s hope that they dedicate the needed resources to ensure that MISMO remains the industry standard.

****Also, Urban Lending Solutions, a provider of residential and commercial mortgage products and services, announced that Thomas “T.J.” Lewis, Jr. has accepted an expanded role within the company as Corporate Diversity and Business Development Executive. Lewis has been actively involved in business development for the company since 2009. In 2012, Lewis will expand his role with a new focus on diversity, leading the company into new contracts with major banks and bringing new minority suppliers into the company’s service.

****“T.J. is a proven executive who will succeed in this role through his dedication to our clients, his consultative sales skills, and his understanding of the mortgage business,” said Mike Forgas, President of Urban Lending Solutions. “He will be an excellent resource for banks seeking to diversify their spending and has already proven an excellent mentor to minority enterprises entering our marketplace. He’s the perfect executive for this new role.”

****Prior to joining Urban Lending Solutions, Lewis spent 14 years in the financial services business, primarily with Bank of America. He served as a Supplier Relationship Development Manager in the Supply Chain Management unit of the bank, where he increased business and developed relationships with diverse suppliers.

****While at BofA, Lewis received the Six Sigma Green Belt Certification for managing a project that saved the bank more than $1 million annually. In addition, he worked with Commercial Bank middle market companies with annual sales greater than $20 million that were based in Florida, Virginia, and Maryland.

***Are you inundated with new rules and regulations?  Here’s the answer:

***At the ENGAGE 2011 Event presented by PROGRESS in Lending Association a panel composed of technology vendors, consultants and mortgage lenders discussed how to turn new rules and regulations into a competitive advantage. Here’s what they said:

www.youtube.com/watch?v=J-jRuuzoJPM

**Executive Interview**

***Can a loan origination system actually complete a successful IPO? It’s never been done before, but Ellie Mae got it done this year. The company not only went public, it completed two high-profile acquisitions. All this happened during a time of flux in the mortgage industry. Ellie Mae also made some personnel changes. Jonathan Corr was named chief operating officer. Mr. Corr, who has been responsible for corporate and product strategy for Ellie Mae, now also oversees all sales, business development, marketing, client services and client support divisions. He sat down with us to reflect on what 2011 has meant to Ellie Mae and the mortgage space. He also shared his vision for the future of mortgage lending.

****Q: On a personal note, you’re an avid golfer. Why do you like the sport so much and how has being a good golfer influenced your business decisions?

****JONATHAN CORR: I’ve been golfing since business school. It’s an interesting sport on a number of levels. It looks like such an easy game, but it continually challenges you. There’s also an emphasis on precision. It’s amazing how good your stroke can be if you’re precise about it, but if you lose your focus causing you to be off by even just a fraction, it can make a big difference. No matter how often you do it, it’s always challenging.

****Also, going off and spending a lot of time on beautiful courses out in the fresh air is relaxing. It can be frustrating, but just being out there in nature puts everything into perspective. It’s very refreshing. You learn a lot about yourself.

****From a business standpoint, unlike other things that you might do that are competitive, you have time to have good conversation and get to know folks. You get to go out of the office and live. It’s also a game that shows the true nature of people when it comes to their integrity. There is no referee. You have to referee yourself. It also gives you a sense of people in an environment with stressors. You can see how people react to a poor shot and that’s very telling as to how they will react in business. I don’t play as much as I’d like. It’s a great game.

****Q: Speaking of introspection, do you think lenders think enough about their own processes and how they can improve?

****JONATHAN CORR: Yes and no. It depends on the lender. I see a lot of lenders looking to improve their processes. Lenders are looking for fundamentally new ways to deal with industry challenges. They are also looking for new ways to get customers. Those folks are leading the way and differentiating themselves. Those folks will become the best companies in the space. There are other folks that are stuck in their ways. That’s a reflection of what you see in every industry, especially when it comes to embracing new technology. Everything goes through technology adoption curves. We go through these curves where you start with what I’ll call the lunatic fringe. There were some companies doing e-mortgages early on. Some would call them the lunatic fringe.

****From there you move to early adopters. From there you talk about the early majority, the late majority and the laggards. You are always going to have the late majority and the laggards. Those are the companies that follow. Those companies don’t become leaders because they are not adopting new technology to get the benefits of that technology, they are doing it to survive. Our industry is like that. Today we’re in that middle period. New ideas like e-disclosures, e-signing, automated compliance, investor delivery, you can map these ideas in terms of adoption.

****Q: In terms of conditions that may push those laggards along, there is a lot of emphasis on quality. What does the need for greater loan quality mean in terms of technology adoption?

****JONATHAN CORR: We’re going to continue to see increased demand from the regulatory side. There will be continued change. Let’s look back at the RESPA changes, that accelerated the use of e-disclosures. Loan officer compensation accelerated the use of product and pricing technology. We’re going to see the Truth in Lending and Good Faith come together. We’ll see a lot of Dodd-Frank pushed out through the Consumer Finance Protection Bureau. With all these demands and changes, in many cases automation is being forced.

****Also if you look at investor demands, everyone is looking for verification, re-verification and verification again. This is not about productivity for the sake of productivity, it’s about being able to do all of these things in a timely way, in a cost effective way, and still be profitable. These changes have been an accelerator of the use of technology and will continue to be well into the future. Even if the regulation pendulum goes back and becomes more relaxed, which it will in time, there will be no going back because lenders will have experienced the benefits of automation and they’ll want more.

****It’s unfortunate that this was driven by a massive meltdown and a recession the likes that we haven’t seen since the Great Depression, but it will prompt more technology usage. You’ll see more consumer protection rules, for sure, but hopefully the processes and technology that lenders put in place will make sure this doesn’t happen again.

****Q: What specifically does the industry need to deal with new regulation? Are there particular technologies that lenders must adopt?

****JONATHAN CORR: One of the technologies that has shown it can carry a huge benefit and help lenders move to a truly automated process is the Software as a Service model. The fact that the technology is readily available, storage is easy, your data is managed for you, what you’re seeing is the technology provider is doing what they’re good at while you focus on what you’re good at. Another benefit is that technology is no longer cost prohibitive so you can get that movement. With the ongoing change in this industry, lenders don’t want to install new technology every time there is a new rule. The technology vendor should do that for you. Not only is this model important and relevant for other markets, the idea of doing things electronically over the Web is happening today because of SaaS. This technology enables lenders to have both control and transparency.

****Other technologies that we’ll see become more important are about customer service. How do you do that? The key is mobile technology. The key will be how do you go mobile so the technology is both valuable and useful to the loan officer and the consumer.

****We’re also doing stuff around success-based pricing. We’re bringing different technologies together that were just loosely connected prior. Today everything has to be in sync because you have to enforce data security and accuracy. SaaS makes more possible.

****Q: How is Ellie Mae promoting a more connected/transparent process through its technology?

****JONATHAN CORR: Our vision, our North Star is the desire to be one of the drivers of end-to-end automation. What do I mean by that? Everything from the first consumer touch to the final investor delivery should be electronic. There is $750 per loan in just waste today. That’s money thrown out the window. Why should it take 30 to 45 days to close a loan? We are always thinking about how to make our clients more successful. If you can automate everything, and still offer the lender complete control, and enable them to better serve the borrower, that’s our goal.

****We have a broad platform of Software as a Service solutions that amount to a full enterprise offering. We’ve also been very focused on compliance. The No. 1 priority for every lender that we talk to is compliance. We’ve made the investment in the area of compliance through acquisitions and internal innovation. We consider that to be a big differentiator for us. We’ve gone even further to work with both our clients and investors like Wells Fargo to create a streamlined process that ensures quality. We’re also in the midst of rolling out more functionality around consumer direct because that’s where our customers are going.

****I would love e-mortgages to be the norm, but that’s going to be an evolution. We have to do our part to help people get there incrementally. If we’re going to get private investors back we need a model that provides transparency and true data. The private market needs to see that the process that the lender goes through ensures accuracy.

****Q: It’s been a big year for Ellie Mae. Your company went public, bought a pricing engine and recently bought a competing LOS in DataTrac. Reflect a little bit on what this year has meant to Ellie Mae and what we can expect from you guys next year?

****JONATHAN CORR: As you said, it’s been a big year for us. It’s been exciting. The IPO has really allowed us to have additional currency so we can invest to support our customers both through acquisition and organically. The acquisition of Mortgage Pricing System added product and pricing functionality. We added lots of customers and executed on our strategy that product and pricing is great as a standalone, but it is better when it’s embedded in the fabric of everything you do.

****The DataTrac acquisition was fabulous for us. We could not have diagramed a better acquisition in terms of picking up loan share and volume. They also have a fantastic team of leaders like Rob Katz and great technologists, as well. DataTrac might not have been the biggest innovator, but they had a large and loyal customer base because of how closely DataTrac worked with their customers. Going forward we will be able to bring the capabilities of DataTrac and Encompass together to offer a combined solution.

****This year as a whole told us that the success-based pricing model has been the right bet. We’ve seen revenue grow steadily in that category. We set a great foundation going into next year. Is 2012 going to be a tougher year? Most think so. Most predictions say we’ll be down another 20% in terms of volume. I don’t know. In spite of market origination declines we’ll bring our products even closer. Lastly, I think the idea of creating a total quality loan through our partnership with Wells Fargo will become a standard. I expect other investors to do the same.

****INDUSTRY PREDICTIONS:

****Jonathan Corr thinks:

****1. There is a good chance that we’ll see some benefits from HARP 2.0.

****2. Rates will remain low and the economy won’t change dramatically.

****3. We will also see an accelerated movement toward automation, especially when it comes to SaaS.

****INSIDER PROFILE:

****Jonathan Corr joined Ellie Mae in 2002 as senior vice president of product strategy. He became the company’s executive vice president and chief strategy officer in 2005. Just this year he was promoted to Chief Operating Officer. Prior to his work with Ellie Mae, Mr. Corr held executive level positions at PeopleSoft, Inc., Netscape and Kana/Broadbase Software/Rubric.

**Executive Interview**

***As we all know, defaults, workouts and foreclosures will continue to be the norm for some time to come. These market conditions are turning investors into landowners and whole neighborhoods in some areas of the country are inundated with vacant homes. What does all this mean? According to CNBC, “in California, median home prices took their steepest dive in May, down 8.2 percent year over year to $280,000, as distressed sales made up more than half the market… Fannie acquired 53,549 foreclosed properties in the first quarter, up from just under 46,000 in the previous quarter.”

****Because of the extent of the foreclosure/REO problem there are even proposals circulating that would force the GSEs to actually become landlords and rent these vacant homes. That would result in a whole host of new issues as the GSEs are not set up to act in this manner. So, how do we solve this crisis? Joe Badalamenti (left) and William Walsworth of Five Brothers share some ideas:

****Q: What are the key trends and most pressing issues facing servicers as it relates to field services?

****JOSEPH BADALAMENTI: Among the issues facing today’s mortgage servicers, strict property conveyance rules and other HUD mandates represent one of the most pressing. Bid procedures, covered work, dollar thresholds, submittal protocols…they’re all part of the details that – aggravated by increased numbers of foreclosed properties – can threaten the servicer’s ability to meet strict HUD conveyance rules and regulations. If unchecked, the added costs – including interest penalties and denied claims – can quickly escalate from minor irritant to major financial pain.

****To help client’s address these concerns, Five Brothers has created a series of support solutions that help servicers eliminate frustrating and potentially costly conveyance problems, while improving the value of their FHA-backed mortgage assets. These solutions can lead to highly efficient, fully compliant servicing and foreclosure processes for every FHA property in the servicer’s portfolio, results we’re already achieving with a 99% success rate for many of our clients.”

****Q: Can you give some specifics?

****WILLIAM WALSWORTH: One example is our ClaimSys technology, which expedites fully compliant FHA claims by allowing servicers to complete HUD claims sections A through E, faster and more efficiently. Using ClaimSys, servicers can lower claims processing costs and improve productivity, while producing virtually error-free results.”

****Assuring bid accuracy is another way we’re helping servicers minimize conveyance missteps. Using the latest HUD-approved cost estimator, Five Brothers streamlines bid validation and submittal by automatically resolving non-conforming repair/maintenance bids to meet HUD specifications. By confirming bid accuracy prior to submittal, this technology helps servicers speed work completion/reimbursement cycles, drastically reduce bid rejections, and lower administrative costs.

****HUD P260 bid data entry is also an important piece of the HUD conveyance challenge. As FHA specialists, we’re now providing bid data entry into the HUD P260 portal as part of our service platform. We’re finding that this added service goes a long way toward relieving client compliance worries, while drastically reducing processing time and helping ease workflow bottlenecks.

****Notification of completed P260 bid entry is automatically posted to client’s secure section of Five Brothers’ FiveOnline web-based workflow management system. Using the HUD P260 portal, mortgage servicers then simply accept the completed P260 bid, resulting in a simpler, faster, more accurate bid process.

****JOSEPH BADALAMENTI: Meeting the compliance challenge means having the right information in the right hands at the right time. Our in-depth ongoing involvement with FHA-backed properties positions us to communicate HUD rule changes to clients, customer service staff and members of our field service team, as they happen. We do this through our FiveAlerts online news updates, blanket e-mails, and postings to our FiveOnline workflow management portal, reinforced through a rigorous multi-level quality control process.

****Q: In addition to FHA/HUD compliance, do you see other important regulatory issues on the horizon?

****JOSEPH BADALAMENTI: Locally-based compliance challenges are becoming more numerous. One example: Municipalities throughout the country are enacting regulations requiring registration of vacant properties, typically requiring information on how long the property has been vacant, plans for the property and who to contact in case of an emergency. With municipalities continually enacting or modifying their own versions of such regulations, compliance can be a difficult and complex task.

****To help address this issue, we maintain and continually update a nationwide vacant property ordinance database. Clients are automatically alerted to changes and have direct access to the database through our FiveOnline workflow management portal. Five Brothers manages the registration process from start to finish, establishing rapport with municipal authorities, notifying mortgagees, filling out and submitting registration forms and coordinating actions needed to assure compliance.”

****As the volume of unoccupied and foreclosed properties increases, code compliance is also demanding increased attention. The key is to address code compliance problems before they occur and violation notices are issued. We’ve taken the initiative by building strong lines of communication between the client and enforcement officials, and continually updating our field service personnel on current code compliance issues and potential violations, so they can be addressed early in the P&P cycle. Should a violation occur, we provide itemized estimates of work needed to bring the property into full code compliance.”

****Q: How is technology helping to improve results for today’s mortgage servicers?  

****WILLIAM WALSWORTH: There are a number of very good mortgage servicing technology platforms. In many cases, however, legacy systems may not fully address specialized requirements arising from the kind of dynamic, fast-evolving market we find ourselves in today. Our approach has been to create a suite of innovative, regulatory-compliant solutions, each optimized for a specific requirement or task, and each tailored to the client’s unique needs and business opportunities. We’re seeing servicers use these solutions – which are fully compatible with all major mortgage servicing platforms – to save time, eliminate errors and increase process efficiencies across the enterprise.
****JOSEPH BADALAMENTI: Our FiveOnline workflow management system is a case in point: With convenient and secure 24/7 online access, this web-based workflow system enables fast and efficient ordering, tracking and management of all default management services. It’s a very robust, image-based system: FiveOnline streamlines order placement and invoicing, provides on-demand retrieval of documents and photos, and instantly generates work status updates and property condition reports. And by using FiveOnline to generate management reports, system users can accurately track performance and costs over time.”

****However, there’s more to FiveOnline than paperless workflow management. It’s actually a portal providing instant, single-screen access to all kinds of  functionality, including vacant property registration, HUD claims processing, completed HUD P260 data entry notification and much more.
****WILLIAM WALSWORTH: Of course, technology is playing a vital role in other challenges, as well. Many servicers, for instance, continue to struggle with the inefficiencies and high costs of traditional document handling processes. Expanding regulations, shifting market conditions and new business demands can easily overwhelm existing document solutions. Our MARSdocument management/processing system is a scalable, regulatory-compliant solution created specifically to address these issues by speeding and simplifying data aggregation, task management, tracking and reporting.”

****Utilizing Optical Character Recognition (OCR) technology, MARS allows for high-speed scanning, extraction, transmission, collection and dissemination of mortgage data. We designed MARS to be applied as a stand-alone solution, but it can also be integrated with virtually any existing document management system to eliminate document loss, increase accuracy and enhance information security.
****IntelliStorage, an enhancement to our MARS technology, focuses on secure document storage and retrieval. Functionality includes hi-speed scanning, intelligent document classification (indexing) and file access through a secure web-based interface. Loan-level indexing makes it fast and easy to retrieve and organize files linked to specific business tasks. By better integrating content with business processes, mortgage servicers are able to reduce cycle time, streamline workflow and increase productivity.

****Q: How is technology helping servicers deal with elevated volumes of loan defaults and foreclosed properties?

****WILLIAM WALSWORTH: Well, there certainly are opportunities to improve productivity and results at various stages of default management. One area ripe for automation is loan modifications. We’ve responded with our MOTZ loss mitigation software, which enables mortgage servicers to quickly modify loans in full compliance with HAMP and FDIC guidelines. With new levels of speed, efficiency and accuracy, MOTZ allows mortgage servicers to quickly identify up to 1,000 curable and non-curable loans per minute, saving time, streamlining operations and reducing foreclosure losses.

****MOTZ accelerates loan analytics, determines correct loan modification parameters and instantly generates cover letters, amortization schedules and loan documents. It’s easy to use, integrates smoothly with most existing mortgage servicing systems and fully complies with all FHA, Fannie Mae, Freddie Mac and VA regulations. 

****Another challenge for mortgage servicers is processing of HUD’s Single-Family Application for Insurance Benefits, required for all FHA-insured defaulted properties. Manual systems can be time consuming and costly. Even small errors can lead to lengthy delays in claims resolution. Working with your existing claims processing program, or as a standalone, ClaimSys populates required fields allowing servicers to complete HUD claims A through E in compliance with HUD rules quickly, efficiently and virtually error-free.
****Q: What are the most pressing issues the industry is facing in preserving and maintaining REO properties?

****JOSEPH BADALAMENTI: Industry wide, preserving and maintaining REO properties has taken on increased importance as foreclosure rates have risen and regulatory compliance has become more urgent and complex. The servicer’s first step in navigating these new realities is to find the right field services partner – one well matched to the servicer’s particular needs and unique business circumstances. Choosing the right field service provider can go a long way toward reducing REO losses and boosting asset returns.

****In our experience, an effective partner must be able to provide both pre-foreclosure services, such as property preservation, inspections and valuations, and REO services, such as occupied property management, pre-marketing services, marketing services, and closing and title services.

****There’s no question: Effective pre-foreclosure programs – what happens before a property falls into the REO column – are vital to making the most of REO property assets. Property preservation, inspections and valuations are the foundation of asset value. Getting them right makes downstream REO tasks a whole lot easier and more effective.

****Q: What are the keys to improving REO results?

****JOSEPH BADALAMENTI: Strong field execution is certainly one of them. Servicers need to look for a provider with a nationwide network of experienced field service professionals that can act quickly and effectively to optimize the safety, value and marketability of their REO properties. This is much more than simply securing and maintaining the physical asset – the provider must retain 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.

****Servicers are looking for a comprehensive approach…capabilities and services that can be combined into regulatory-compliant end-to-end solutions. Integrated with our pre-foreclosure services, our REO management program also includes everything from occupied property management, to closing and title services.

****With in-depth REO expertise and proven strength on the ground, we’re able to create and apply the right marketing approach for each REO property. Thanks to our locally applied national footprint, we’ve been able to localize property marketing services that help return maximum market value in minimum time. Market analysis, property marketing strategy, turnkey auction management, broker management, marketing campaigns – they’re all part of a successful, high return REO property disposition program.

****WILLIAM WALSWORTH: Leading national REO service providers incorporate advanced REO management technology into our programs, allowing servicers to monitor and evaluate every aspect of their REO program with paperless, point-and-click convenience. Effective REO management technology allows servicers to organize and track all REO tasks and events; maintain communications with all parties in a real estate transaction; meet all regulatory and lender requirements and assure a clear audit trail.

****INDUSTRY PREDICTIONS:

****Joseph Badalamenti thinks:

****1. The mortgage industry will increasingly turn to outside default management partners as servicing requirements continue to become more numerous and complex, and internal staffing and related overhead costs rise.

****2. There will be a growing need for specialty technology solutions that automate the resolution of real estate owned (REO) assets.

****3. Lenders, servicers and asset management companies will face an expanding array of regulatory requirements, including a myriad of code compliance requirements and local vacant property ordinances.

****INSIDER PROFILE:

****Joseph Badalamenti got his start in the default management industry in 1967 as a HUD contractor. Now, 43 years and millions of inspections later, As CEO Badalamenti has built Five Brothers into a highly successful and respected industry leader offering a full range of default management services and technology solutions. His strong belief in client-centered partnering has spawned a nationwide network of highly effective customer and field service professionals.

****INDUSTRY PREDICTIONS:

****Bill Walsworth thinks:

****1. Tablet technology will be utilized to provide real-time onsite property reports.

****2. HTML 5 will break out, providing for feature rich web-based applications to replace typical desktop applications.

****3. 4G and GPS will allow video and voice data to be streamed directly from a property using a personal computer, tablet or smart phone, allowing instant, real-time review of property condition.

****INSIDER PROFILE

****In 1995, William Walsworth joined Five Brothers as Chief Information Officer, developing all of the Five Brothers technology solutions. Walsworth provided Five Brothers’ clients with efficient and effective solutions for loss mitigation, asset preservation, loan modification and HUD claim processing, as well as document management, scanning, archival and retrieval. Prior to joining Five Brothers, Walsworth served as a senior systems analyst at Hong Kong & Shanghai Banking Corporation in New York before becoming President of GNU Software Development in Ann Arbor, Michigan.

**Executive Interview**

***This year electronic collaboration vendor DocVelocity made headlines when it introduced DocVelocity Threads, which is essentially an online customer portal. Threads allows you to communicate and exchange documents with anyone involved in the loan process —even if they don’t have DocVelocity. This means anyone in or outside of your company can ask questions, upload additional documents, or get updates on where their file is in the process. The company also introduced DocVelocity Desktop, which combines the scalability and flexibility of a Web-based application with the speed and power of a desktop application. This gives you secure online access to data anywhere in real time with the ability to perform virtually all daily tasks on an ultra-fast desktop application. Eric Kujala, Vice President at DocVelocity, talked with us about these advances and how the mortgage industry can evolve to a more paperless environment overall.

****Q: Tell me about the threads update and how that’s going?

****ERIC KUJALA: Threads is all about the communications that we had with our clients. We do a good job of listening to our clients and trying to understand what their problems are. We really want to try to understand what the industry problems are that our clients face today. In a roundabout way we go to a point where they said that they need to think about better ways of communicating with the customer. They told us that they want their customers to have an easier time of doing business with us so they come to us instead going with our competitors.

****That seems like a simple request. As we talked this through with them we first asked them what their definition of a customer was. It may seem like an easy question with an easy answer, but actually it isn’t. In the end, our customers answered this question in a variety of ways. It actually came down to the fact that they wanted to reach a subset of a variety of different mortgage participants in a wholesale organization. For example, the broker is the customer they want to get the documentation in and speed up interaction. They also wanted better quality interactions from and with the broker.

****When you’re a retail organization that client is different. Retail lenders have a couple of different customers. They have the loan officer in that they want to recruit the best loan officers. And don’t forget, everybody wants to offer the best overall process so that they can transfer document seamlessly to each department within the mortgage organization. We want to help bridge that gap. That’s what threads accomplishes. We are helping lenders of various sizes, shapes and forms deal with a variety of customers in an automated fashion.

****Q How is it going? Do you have any customer response yet?

****ERIC KUJALA: Customers are telling us about threads every day. It’s changing how they’re interacting with their customers. We’ve been working with customers for the last several months to optimize threads and to deploy it. It is been very successful. A lot of our customers are in production with the technology right now. There’s a strategy around this. It’s nice to see lenders thinking strategically about technology. As we help them roll out this technology they are telling us that it’s giving them a leg up. They are finding new ways to get new business with this technology and that’s very gratifying because that’s what technology should do. In the end it should be a helping hand for wholesale lenders, retail lenders, really any lender in the mortgage industry today. As a vendor you want to help them get new business and help them keep existing business by offering an enhanced customer experience. You want to provide a clear benefit for all the stakeholders involved in the mortgage today.

****Q: Another key element of DocVelocity 3.0 is the desktop feature. Talk to me a little bit about what that means to lenders in the market today.

****ERIC KUJALA: This evolved from what we called DocVelocity Messenger. Basically what you can do is add a file from or to the Web using this tool. This created a new way, and a faster way, for you to push those documents as images back and forth using the Web so that you can interact with people internally and externally get those documents to work for you. Desktop takes that one step further. We want to make sure that users can interact with that electronic paper just as easily as they can with real paper. That’s the whole philosophy behind Desktop.

****If you think about it, you have documents moving in and out of the file, and you have people interacting with a variety of documents. We wanted to accomplish this in a seamless fashion. We wanted to find an easy way for people to interact with those documents as they move back and forth. We also wanted to make sure that the experien