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Gateway First Bank Chooses Fee Service To Help Mitigate Risk

Gateway First Bank, one of the 10 largest banks by assets in the State of Oklahoma and one of the largest mortgage bank operations in the United States, which also operates under the name “Gateway Mortgage Group,” now uses Black Knight’s Ernst Fee Service. This solution provides lenders and settlement agents with accurate recording fees and taxes to assist a lender with its TRID compliance efforts. Gateway First Bank will use the fee and monitoring service to help mitigate risk associated with fee cures and enhance the consumer experience. 


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“We needed a trusted provider that could automate our fee and closing cost data to help us more accurately disclose fees to customers,” said Whitney Barth, Vice President, Product Development Management for Gateway First Bank. “Fees frequently change during the loan process, and Black Knight’s Ernst Fee Service lets us provide our customers with accurate fees based on the closing date and automatically update those fees within our loan origination system.”


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Ernst Fee Service is used by lenders to minimize costly fee cures by providing accurate recording fees, transfer taxes, property tax, title, settlement and inspection data. This enterprise-wide solution provides all relevant third-party vendor fees that are required on the Loan Estimate and Closing Disclosure. Gateway Mortgage Group will further customize its use of Ernst Fee Service to manage its own proprietary fee data, while exposing fees and fee changes in a more automated way. 


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Additionally, Ernst Fee Service’s patented monitoring service will automatically recalculate loan values, alert the lender and update the loan origination system if there has been a fee increase due to a changed circumstance that allows for a revised loan estimate.


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“We are pleased to support Gateway First Bank with advanced capabilities that will help improve the accuracy of disclosures and better prevent fee cures,” said Rich Gagliano, President, Black Knight Origination Technologies. “Black Knight’s passion for accuracy carries through everything we do, and our fee service is no exception. We’re committed to providing our clients with the most accurate closing costs so that they can provide the best customer experience.”

CoreLogic Launches New Fraud Risk Score Model

CoreLogic announced its newest version of the Fraud Risk Score Model— version 4.0. Delivered within the LoanSafe product suite, the new model accounts for recent changes in mortgage fraud trends while leveraging new data assets. 


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Drawing experts from more than 30 top financial institutions, this year’s Mortgage Fraud Consortium was held in San Diego, California, and featured speakers from the FBI, Fifth Third Bank, Cognizant, Fannie Mae, Freddie Mac and more. The event revolved around the theme of current fraud trends and what they mean for the future market. Program discussions ranged from procedures to improve fraud detection to the impact eroding housing affordability has on fraud risk to how law enforcement officials are working to identify and combat the latest fraud schemes. Additional insights included case studies and best practices to help improve mortgage fraud prevention practices.


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“This year’s Mortgage Fraud Consortium was another success, providing leading industry professionals with the opportunity to learn about the latest mortgage fraud trends while collaborating on ways to reduce future risk,” said Bridget Berg, principal, Fraud Solutions at CoreLogic. “According to our latest research, the country has seen a 10 percent increase in fraud risk from Q1 2018 to Q1 2019. This continual increase reinforces the need for this annual event and we’re proud to continue helping mortgage loan providers mitigate risk and fight back against fraud.”


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During the event, CoreLogic shared details of the LoanSafe Fraud Manager roadmap and announced version 4.0 of its Fraud Risk Score Model. Integrated into the LoanSafe solution, the updated model provides more transparency into how the Fraud Risk score is calculated through an integration of alert predictive of fraud risk. The updated score was designed based on feedback from CoreLogic clients and will help make lenders more efficient in their fraud detection practices, ultimately saving them time and money. The latest version of the Fraud Risk Score will be released in the summer of 2019.


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CoreLogic is a global property information, analytics and data-enabled solutions provider. The company’s combined data from public, contributory and proprietary sources includes over 4.5 billion records spanning more than 50 years and providing detailed coverage of property, mortgages and other encumbrances, consumer credit, tenancy, location, hazard risk and related performance information. The markets CoreLogic serves include real estate and mortgage finance, insurance, capital markets, and the public sector. CoreLogic delivers value to clients through unique data, analytics, workflow technology, advisory and managed services. Clients rely on CoreLogic to help identify and manage growth opportunities, improve performance and mitigate risk. Headquartered in Irvine, Calif., CoreLogic operates in North America, Western Europe and Asia Pacific. 

New Compliance Trends

The United States has made great strides towards equality in many aspects of life since the civil rights movement of the 1960’s. The housing industry, though, is one area in which we as a country have historically struggled to achieve the desired results. Congress passed two key pieces of legislation aimed at leveling the playing field in the industry. The Fair Housing Act was passed as part of the broader Civil Rights Act in 1968. This law made it illegal for banks to discriminate on the basis of race when evaluating mortgage applicants. Prior to its passage minorities were often unable to obtain loans from most banks, as systematic discrimination was commonplace. 


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Although the Fair Housing Act illegalized overt racial discrimination, it did little to resolve the disparate impact of some other common lending practices. Many banks began to engage in what is known as “redlining” in what they designated as high-risk lending areas.  The practice of redlining is exactly what it sounds like: banks would literally draw a red line around certain areas of states or cities and refuse to lend to people in those areas. Those redlined areas tended to be home to very low to moderate income individuals and families and, more often than not, those neighborhoods were occupied predominantly by minorities. 


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Lending institutions abolished their explicitly discriminatory lending policies, but the racial discrimination that the Fair Housing Act was enacted to prevent was still taking place under the guise of risk-based lending. In response, Congress enacted the Community Reinvestment Act in 1977, which not only made redlining illegal, but compelled banks to lend and invest in those low to moderate income communities and neighborhoods. Although the law was enacted with the greatest of intentions, it has proven to be woefully inefficient in narrowing the housing gap for low to moderate income families, specifically minorities. Furthermore, many lending institutions struggle when trying to internally evaluate performance ahead of regulatory reviews because of the lack of definitive guidelines and frequent implementation of revisions.  


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The CRA Tests

Every FDIC insured bank is responsible for meeting requirements promulgated by the Community Reinvestment Act and is subject to review from regulatory agencies. As discussed above, the goal of the Act is to help low to moderate income Americans and traditionally underserved communities. The definition of “low to moderate income” varies based upon the geographic regions in which institutions operate, as they fluctuate based upon average income for those specific areas. In areas with high costs of living and higher average incomes (such as New York), the poverty line is higher than it would be in areas with lower average income and cost of living (such as Wichita, Kansas).


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The region in which the lending institutions operate is not the only variable that affecs lenders’ scope of responsibility under the CRA. The size of the institution also dictates the stringency of the requirements to which they are subject. The larger the institution (the greater the assets) the more resources it must devote to meeting the three compliance tests. Those tests are: 1) the Lending Test; 2) the Investment Test; and 3) the Service Test. For each test, regulators will give scores of “Outstanding”, “Satisfactory”, “Needs to Improve”, and “Substantial Noncompliance”, and then will give an overall score to denote the institution’s level of general compliance. In this section we will discuss what regulators look at for each test. 

The Lending Test is the most straightforward of the three. When evaluating compliance, regulatory bodies look at the dollar value of loan to deposit ratios for the institutions’ low to moderate income clients. The higher the dollar value of loans to total deposits, the higher the score will be given to the institution being evaluated. One of the most common problems many lending institutions face when it comes to CRA compliance is the lack of definitive guidelines regarding grading thresholds for the three tests. Most lenders are able to develop compliance targets internally based upon past experience, but are always on edge due to the uncertainty about which rubrics regulatory agencies employ when evaluating performance. Although there is no bright-line test, Kenneth H. Thomas, president of Miami-based Community Development Fund Advisors, and former lecturer at the University of Pennsylvania’s Wharton School, has formulated his own thresholds based upon his extensive experience in the industry. He surmised that in order for an entity to achieve a score of “Outstanding” on the lending test, it must have a loan to deposit ratio of at least 80%. 

The second test that lending institutions must pass is the Investment Test. This test looks at the qualified investments that are made in low to moderate income service areas. This test, however, doesn’t simply look at the dollar value of the investments. Although the amount of investment is important when evaluating compliance under this test, regulatory agencies look deeper in order to ensure that the investments are impacting these communities in a meaningful way. Regulators judge the innovativeness and complexity of each investment to encourage investors to thing about novel ways to remedy problems that have traditionally plagued these communities. Lenders are also required to make investments that are responsive to the development needs of these communities. Because adversity faced by beneficiaries of this law vary widely in each geographic area, there cannot be a “one size fits all” method of investing. Regulators want investors to seriously consider the needs of each community in which they invest. Again, although there are no definitive guidelines regarding how much is enough, Thomas suggests that in order to achieve an “Outstanding” rating, lenders should looks to invest 1% of review period assets. 

The last test under which lenders are evaluated is the Service Test. This test looks at the type and number of retail and community development services that banks provide to each low to moderate income service area. Like the Investment Test, this test doesn’t just the number of services into account. Lenders must provide services that are innovative and responsive to the needs of each community in which they are offered. From his experience, Thomas recommends that lenders who wish to attain an Outstanding score must offer 12 services per year per billion dollars in assets.

Despite numerous regulatory bodies and agencies offering overviews and some guidance regarding compliance with CRA requirements, many lenders are still in the dark about what they need to do to receive Outstanding scores because of the lack of definitive compliance standards. Approximately 90 percent of lenders were given an overall grade of satisfactory, while less than 10 percent were able to attain Outstanding marks. These statistics prove that despite devoting significant time and resources to CRA compliance, lenders still struggle with implementing programs that unequivocally meet regulatory standards. 

CRA Compliance Efficacy

When compiling a CRA requirement plan, lenders should seek to implement programs that will not only help the community, but will empower those who the CRA aims to help to become homeowners. For instance, many low to moderate income consumers struggle with credit. There is a demonstrable need for services that provide credit education and remediation in those communities. Many lenders have already begun to partner with non-profit entities that provide these types of services for applicants who do not have the necessary credit scores to qualify for the financial products that they seek. If those same lenders partnered with non-profits to provide those same services at no cost to low to moderate income communities that they serve, it would help them meet the requirements of not one, but two CRA tests. Funding a credit remediation program such as the one described above would obviously sere to help meet the requirements under the Service Test. However, once those low to moderate income households or individuals build their credit profile, they could qualify for mortgages or various other financial products, which would help that same lender meet Lending Test requirements as well. Lenders should begin thinking creatively an order to make strategic to investments to ensure that they are positioned to receive some type of benefit from the resources they are already devoting to community development. 

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CoreLogic Introduces HMDA Check

CoreLogic has launched its new HMDA Check solution. CoreLogic HMDA Check combines optical character recognition (OCR) data extraction with a rules engine that helps automate the HMDA auditing process. This allows lenders to increase efficiencies, improve data accuracy, reduce costs and remain compliant with HMDA requirements.


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The Home Mortgage Disclosure Act, or HMDA, requires covered financial institutions to provide mortgage data to the public to combat housing discrimination.


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CoreLogic HMDA Check is designed to expedite the Loan Application Register (LAR) data collection and submission process by automating review and validation procedures before submitting to the Consumer Financial Protection Bureau (CFPB). The new solution inspects more than 30 different loan origination document types for more than 100 HMDA reportable fields, including loan features such as loan term, interest rate, and borrower information. Then HMDA Check validates the LAR data, immediately highlighting discrepancies for the lender to support his or her HMDA reporting needs.


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Visually reviewing loan source documents against a LAR submission can take hours and the process is prone to error, making it expensive for lenders. By automating this process with HMDA Check, lenders can speed up the loan review process, increase consistency, and help identify discrepancies. Further, the new solution is configurable so the rules and reports produced can be adjusted to match a lender’s specific policies and documents.


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“Discrepancies between source loan documents and the LAR can potentially result in penalties from the CFPB, as well as set a more challenging examination process,” said Cres Hay, senior leader, Product Management at CoreLogic said. “HMDA Check helps lenders meet regulatory industry requirements by integrating OCR and validation technologies into one place, revitalizing a once manual, labor-intensive process. The fully-automated solution ends the ‘stare-and-compare’ analysis method and helps lenders focus their resources more efficiently.”

Be A Hero, Outmaneuver, Outperform, Outlast

One of the most common concerns weighing on loan officers across the country is the rising cost of lead acquisition in the face of a steady decline in mortgage applications. An increase in home prices across the market is taking its toll on the number of consumers actively applying for a mortgage. According to reports released by the Mortgage Bankers Association, mortgage applications have fallen a staggering 17 percent from only a year ago, and experts surmise that the rising purchase prices are playing a major role. To compound the problem, refinancing applications have also continued to trend downward, and are the lowest they’ve been since the end of 2000. When you combine these statistics with the ever-increasing cost of origination, it paints a bleak picture for lenders and loan officers. 


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The question has now become, “how can lenders weather these arduous trends to outmaneuver, outperform, and outlast the competition?” Because the number of applications is down, overall, one of the best available solutions is forming of strategic partnerships that will allow lenders to wring all possible value out of those leads that are available by increasing the rate and percentage of conversion. I know this sounds much easier said than done, but if lenders are able to step back to gain some perspective regarding why their leads are failing to transition into successful applications, the problem becomes much easier to solve. 


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Subpar credit scores are one of the leading hindrances to being approved for a mortgage. According to a 2016 study published by the Federal Reserve Bank of New York, more than one-third of Americans have a credit score below 620. Even more alarming, the CFPB published a study in 2015 that found in addition to those with poor credit, there are another 45 million adults who are either un-scoreable or who do not have a credit score. Because the number of applications is down, in general, its is now more important than ever to find creative ways to overcome a low credit score for those applicants who would otherwise qualify for a loan.


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We are beginning to see the emergence of non-profits that specialize in credit remediation and rehabilitation. Those third-party rehabilitation companies provide services to consumers at no cost to the lenders. This allows those lenders to steer their potential clients toward the assistance that they need to qualify without expending any additional resources, rather than the alternative of simply rejecting potential business. Those lenders who are able to stretch their dollar the furthest by making the most of the leads that they do receive, are the ones who will enjoy the most success in this market and live to see the day when it starts trending in a more favorable direction.

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Your Hero To The Margin Compression Villain

It is said that every hero needs a villain. As a lender it is very easy to identify the villain in today’s mortgage market—declining profitability due to the rising cost to originate a loan leading to margin compression.


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As reported by Kelsey Ramierez, reporter for Housing Wire, “The Cost to Originate a Mortgage Just Got Ridiculous-Again.” She goes on to state, “The cost of originating a mortgage hit all-time highs back in 2013 and 2014, but now, those costs are up once again and much like before, hitting all-new highs.

Lenders continue to struggle in the rising mortgage rate environment, reporting negative profits for the first time since Dodd-Frank compliance brought down profits in 2014.

Back at the Mortgage Bankers Association’s National Secondary conference in New York City, MBA Chief Economist Mike Fratantoni predicted loan loan officers would report negative profits in the first quarter of 2018.


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His prediction was correct.

Independent mortgage banks and mortgage subsidiaries of chartered banks reported a net loss of $118 per loan originated in the first quarter of 2018, according to the MBA’s Quarterly Mortgage Bankers Performance report. This is down from a gain of $237 per loan in the fourth quarter of 2017.

“In the first quarter of 2018, falling volume drove net production profitability into the red for only the second time since the inception of our report in the third quarter of 2008,” said Marina Walsh, MBA vice president of industry analysis. “While production revenues per loan actually increased in the first quarter, we also reached a study-high for total production expenses at $8,957 per loan, as volume dropped.”

In this unfortunate story for lenders, while it is easy to identify the villain, who the hero in this story will be is still up for debate.  We can agree that necessity is the mother of invention and if margins were wonderful, we wouldn’t need to rethink how we originate.  But that’s not today’s reality, so we are forced to ask the tough questions in hopes of finding our hero.


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>>How do we reduce costs without the standard seasonal downsizing?

>>How do we increase origination numbers without blindly hiring more LO’s?

>>Is there a better and more efficient way to originate loans?

>>Can we afford to continue doing business as usual?

In starting to ask these tough questions we must first identify costs to see where the actual numbers are coming from.  

>>Are your numbers off and contributing to your rising costs?

>>How many loans does the average LO close a month in your organization?

>>Of those loans, how well are your LO’s growing the referral business?

>>How many loans can a processor per day, month, and year handle in your organization?

>>Ask the same question about your Underwriters? Closers? Funders? Etc.?

>>While you may have these numbers at your disposal, when was the last time you truly checked to see how accurate they are in today’s market?

>>How paperless is your organization really? How much is that costing you?

>>Why is it that the average Underwriter could handle a pipeline of 100 loans pre-crash but can’t handle much more than 30 today?

In reviewing your numbers one thing should be very clear— the villain in this story in the rising cost to originate. So as a lender we must shift our focus to the potential hero in this story if we are going to survive let alone thrive in today’s mortgage market.  The hero is improving your operational efficiency.  The challenge is how we put this into action.

When lenders originate it is typically done from a very loan centric perspective. The average mortgage company does everything from their LOS and prioritizes their loans by status/milestone/pipeline. Don’t blame the LOS, but instead consider this:

>>Is there a better way to prioritize the steps to originate a loan?

>>How can you empower LO’s to do more without them having to spend more time on tedious follow-ups?

A fresh look at the “flow of work” and not just the traditional workflow of origination to underwriting to funding is required.

The devil is in the details. It is critical that if we are going to defeat the villain, we must take the time to not only understand how much we are spending on each task to originate but also truly understand how we can become more efficient.

Lenders are notorious for running tons and tons of reports.  Unfortunately, reports become stale the minute you print them, so you forward thinking lenders have moved to real-time dashboards.  While that is a step in the right direction, that’s only half the battle. The real key is— what do you do with that data?

It is one thing to understand the data, but if you want to truly gain operational efficiency and be the hero, what you do with the data is so much more important.  Is the data telling you where the bottlenecks exist in your origination workflow?  Those bottlenecks/inefficiencies are costing you money and contributing to your rising costs. Once you identify the bottlenecks how can you eliminate these bottlenecks through workflow automation to create consistent processes that streamline and reduce costs?

Let’s take a step back and look at history. When Henry Ford implemented the assembly line, they saw a dramatic increase in productivity, here’s why:

>>Work was prioritized, pushed to the right person at the right time

>>Ford created sub-assemblies to maximize output

>>Technology then automated the items that a system could handle, but people still do a majority of the work today. It’s more of the right person, at the right time, and at the best price.

The good news is that you don’t have to try and figure all of this out by yourself.  Help is on the way.  We know the mortgage process.  A team of lenders and mortgage technologists created Lodasoft. We’ve been on your side of the fence—struggling with the day-to-day challenges of the constantly shifting mortgage process and rising cost to originate. Based on that experience, we strive to make lenders more efficient, scalable and profitable.

We can help you maximize your team by looking at things from a different perspective.  Lodasoft is a Digital Mortgage Platform focused on task and workflow automation. Designed by mortgage veterans, our strength is in maximizing productivity and quality while providing structure and guidance for all members of the process.

Consider this:you’ve been successful thus far. You’re closing loans, and you might be somewhere in the middle when it comes to profitability. Now, if you could only get the most out of every motion in that process.

The first thing we can help you do is Identify. Zooming out of the day-to-day can work wonders, especially when done by a fresh set of eyes. Here’s an example of questions you might ask in identifying key areas for improvement.

>>What is our process for gathering borrower conditions?

>>How do we actually Track, Approve, and Reject documents?

>>How much of this is done via email?

>>Do all interested parties of the transaction have a Real-time Status into each one of these conditions?

For example, say we’re waiting on an item from a third-party. Do we know how long we’ve been waiting for that particular item? Is it stopping someone else from performing an unrelated function? What does the follow-up process look like? Are we just emailing for updates? 

Once we’ve identified the key areas for improvement, you’ll have a better understanding of how you might transfer responsibilities from one employee to another. Think of it like this, a high-cost resource should almost NEVER perform a low-cost function. If it can be handled through automation, even better! 

The next thing to identify is Communication. So much gets lost due to a lack of transparency. Systems were designed so that multiple users can’t have edit rights to the same areas. It makes sense. If someone is reviewing income and someone goes in and changes the income… well…

Think about it. We all have some reporting mechanism we rely on. As mentioned earlier, some work from system pipelines, some from live dashboards. Some (maybe a majority) still use spreadsheets. 

Why? 

For one, spreadsheets can be manipulated very easily. Make a few updates, attach it to an email, and send to management. Communication is key. People need updates so that they can offer guidance and delegate loans. However, this is where things start to really fall apart.

>>What if the key person on a file is out of the office? 

>>Could that lock extension have been avoided?

As you identify these key areas that need to be communicated to multiple people, you will begin to uncover missteps that create vicious cycles of he-said/she-said. A flurry of CC and BCC emails ensue and this leads to, well…a lot of bad. 

We can help you go from “CC and BCC everyone just in case” to pointed communication at the right time to the right person. This way, your team is being communicated to/with on a “need to know” basis.

These are just a couple of examples of things we do every day that happen because they’ve always been done that way. We can change together.

You no longer have to be a victim to the rising cost of originating loans. Allow Lodasoft to help you rethink how you are originating so that you can streamline your processes while reducing the cost to originate. Let operational efficiency become the hero in your organization.

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Why Dodd-Frank Reforms Are Good For Business

On May 24, the first major financial institution bill with substantial bipartisan support in more than ten years was signed into effect by President Donald Trump. Known as The Federal Economic Growth, Regulatory Relief, and Consumer Protection Act (“Act”), it recognized that the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) must be amended. 

The passage of Dodd-Frank in 2010 – spearheaded by Congressman Barney Frank and Senator Christopher Dodd – was designed to address the 2008 financial crisis with far-reaching reforms, including the creation of the Bureau of Consumer Financial Protection (CFPB) and tighter supervision of financial markets and institutions. Prior to the CFPB, consumer regulations were the responsibility of federal agencies such as the Federal Reserve Board and the Department of Housing and Urban Development. 


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Under Dodd-Frank, community banks with limited resources and large institutions with significant legal and compliance staffs became subject to a number of new regulations issued by the CFPB. The mandatory time frames for the CFPB to issue regulations resulted in rules that were confusing and misinterpreted. Consequently, mortgage lenders provided fewer loan options to limit their liability associated with noncompliance. 

Compliance departments at large banks rapidly expanded to keep up with the increasing number of new requirements. Banks and mortgage providers located in smaller cities and towns had limited to no compliance talent pool to draw from even if they could afford the staff. To offset the rising cost of managing compliance, local community banks sought acquisitions, closed, or merged with other banks. 

What Reforms Mean For Local Mortgage Providers

The amendments include relief for community banks struggling to maintain profitability and the staffs required to implement CFPB regulations or offer new products due to uncertainty and liabilities. 


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Smaller banks are now exempt from many requirements that previously hindered growth. 

For example, finding certified or licensed appraisers in rural areas can be difficult and often those resources do not exist. Now, banks located in more rural communities are exempt from conducting appraisals of real estate property with a transaction value of less than $400,000. The lenders must also provide proof that certified or licensed appraisers are not readily available. 

For areas with high concentrations of community banks, this could mean the difference between the banks’ survival and closing. Laws and reforms move along a sliding scale. Because of the 2008 financial crisis, the scale shifted towards protecting consumers; a decade later, the lending industry hopes the reforms can find a balance between consumer protection and a thriving housing and financial economy. 

Summary of Mortgage Lending Revisions in the 2018 Dodd-Frank Reform

Although the Act addresses banks, student borrowers and capital formation, we are specifically addressing only mortgage lending revisions and improving consumer access to mortgage credit as well as protections for veterans, consumers and homeowners. 

THE FEDERAL ECONOMIC GROWTH, REGULATORY RELIEF AND CONSUMER PROTECTION ACT (“ACT”)

Truth-in-Lending Act (“TILA”)

Definitions were added to the qualified mortgage (ability to repay) provisions related to “Safe Harbor.” 

“Covered institution” is an insured depository institution or an insured credit union that, together with its affiliates, has less than $10,000,000,000 in total consolidated assets. 


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“Qualified mortgage” includes any residential mortgage loan:

>>That is originated and retained in portfolio by a covered institution; 

>>That is in compliance with the limitations with respect to prepayment penalties; 

>>That complies with any guidelines or regulations established by the CFPB relating to ratios of total monthly debt to monthly income or alternative measures of ability to pay regular expenses after payment of total monthly debt, taking into account the income levels of the borrower and such other factors as the CFPB may determine relevant and consistent with the purposes of the statute;

>>That does not have negative amortization or interest-only features; and

>>For which the covered institution considers and documents the debt, income, and financial resources of the consumer as required.

A residential mortgage loan described above will be deemed to meet the ability to repay requirements. 

A residential mortgage loan described above does not qualify for the safe harbor if the legal title to the residential mortgage loan is sold, assigned, or otherwise transferred to another person unless the residential mortgage loan is sold, assigned, or otherwise transferred:

>>To another person by reason of the bankruptcy or failure of a covered institution; 

>>To a covered institution so long as the loan is retained in portfolio by the covered institution to which the loan is sold, assigned, or otherwise transferred; 

>>Pursuant to a merger of a covered institution with another person or the acquisition of a covered institution by another person or of another person by a covered institution, so long as the loan is retained in portfolio by the person to whom the loan is sold, assigned, or otherwise transferred; or 

>>To a wholly owned subsidiary of a covered institution, provided that, after the sale, assignment, or transfer, the residential mortgage loan is considered to be an asset of the covered institution for regulatory accounting purposes.

Any loan made by an insured depository institution or an insured credit union secured by a first lien on the principal dwelling of a consumer is exempt from TILA higher priced mortgage escrow requirements if:

>>The insured depository institution or insured credit union has assets of $10,000,000,000 or less;

>>During the preceding calendar year, the insured depository institution or insured credit union and its affiliates originated 1,000 or fewer loans secured by a first lien on a principal dwelling; and

>>The creditor meets certain other criteria.

Exemption from Appraisals of Real Property Located in Rural Areas

An appraisal in connection with a federally related transaction involving real property or an interest in real property is not required if:

>>The real property or interest in real property is located in a rural area, as defined by Regulation Z; 

>>Not later than 3 days after the date on which the Closing Disclosure is given to the consumer, the mortgage originator, directly or indirectly:

A. Has contacted not fewer than three State certified appraisers or State licensed appraisers, as applicable, on the mortgage originator’s approved appraiser list in the market area; and 

B. Has documented that no State certified appraiser or State licensed appraiser, as applicable, was available within five business days beyond customary and reasonable fee and timeliness standards for comparable appraisal assignments, as documented by the mortgage originator; 

>>The transaction value is less than $400,000; and 

>>The mortgage originator is subject to oversight by a Federal financial institution’s regulatory agency.

A mortgage originator that makes a loan without an appraisal as described above may not sell, assign, or otherwise transfer legal title to the loan unless:

>>The loan is sold, assigned, or otherwise transferred to another person by reason of the bankruptcy or failure of the mortgage originator; 

>>The loan is sold, assigned, or otherwise transferred to another person regulated by a Federal financial institution’s regulatory agency, so long as the loan is retained in portfolio by the person; 

>>The sale, assignment, or transfer is pursuant to a merger of the mortgage originator with another person or the acquisition of the mortgage originator by another person or of another person by the mortgage originator; or 

>>The sale, loan, or transfer is to a wholly owned subsidiary of the mortgage originator, provided that, after the sale, assignment, or transfer, the loan is considered to be an asset of the mortgage originator for regulatory accounting purposes. 

A rural loan may not be made without an appraisal if:

>>A Federal financial institution’s regulatory agency requires an appraisal; or 

>>The loan is a high-cost mortgage, as defined by TILA. 

Home Mortgage Disclosure Act (“HMDA”)

An insured depository institution or insured credit union that originated fewer than 500 closed end mortgages or open-end lines of credit is exempt from the requirement to itemize certain loan data under HMDA unless they have received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent examinations of a rating of “substantial noncompliance in meeting community credit needs” on its most recent examination under the Community Reinvestment Act.

Credit Union Residential Loans

A loan secured by a lien on a 1-4 family dwelling that is not the primary residence of a member of a credit union will not be considered a member business loan under the Federal Credit Union Act.

Protecting Access to Manufactured Homes

Retailers of manufactured homes or employees of such retailers are not required to be licensed as mortgage originators unless:

>>They receive compensation or gain for acting as a mortgage originator that is in excess of any compensation or gain received in a comparable cash transaction;

>>They fail to provide certain disclosures to consumers; or

>>They directly negotiate with the consumer or lender on loan terms.

No Wait for Lower Mortgage Rates

If a creditor extends to a consumer a second offer of credit with a lower annual percentage rate, the transaction may be consummated without regard to the 3 day waiting period requirements in the TRID disclosures.

Congress instructed the CFPB to provide clearer, authoritative guidance on:

>>Applicability of TRID to mortgage assumption transactions;

>>Applicability of TRID to construction to permanent home loans and the conditions under which those loans can be properly originated; and

>>The extent to which lenders can rely on model disclosures if the recent TRID changes are not reflected in the TRID forms published by the CFPB.

Identification for Opening an Account

When an individual initiates a request through an online service to open an account with a financial institution or obtain a financial product or service from a financial institution, the financial institution may record personal information from a scan of the driver’s license or personal identification card of the individual, or make a copy or receive an image of the driver’s license or personal identification card of the individual, and store or retain such information in any electronic format for the following purposes:

>>To verify the authenticity of the driver’s license or personal identification card;

>>To verify the identity of the individual; and

>>To comply with a legal requirement to record, retain or transmit the personal information in connection with opening an account or obtaining a financial product or service.

A financial institution that makes a copy or receives an image of a driver’s license or personal identification card of an individual must, after using the image for the purposes described, permanently delete:

>>Any image of the driver’s license or personal identification card, as applicable; and

>>Any copy of any such image.

This provision preempts and supersedes any state law that conflicts with this provision.

Reducing Identity Theft

“Fraud protection data” means a combination of the following information with respect to an individual:

>>The name of the individual (including the first name and any family forename or surname of the individual);

>>The social security number of the individual; and

>>The date of birth (including the month, date, and year) of the individual.

“Permitted entity” means a financial institution or a service provider, subsidiary, affiliate, agent, subcontractor, or assignee of a financial institution.

Before providing confirmation of fraud protection data to a permitted entity, the Commissioner of the Social Security Administration (“Commissioner”) must ensure that the Commissioner has a certification from the permitted entity that is dated not more than two years before the date on which that confirmation is provided that includes the following declarations: 

>>The entity is a permitted entity; 

>>The entity is in compliance with these provisions; 

>>The entity is, and will remain, in compliance with its privacy and data security requirements, as described in the Gramm-Leach-Bliley Act, with respect to information the entity receives from the Commissioner;

>>The entity will retain sufficient records to demonstrate its compliance with its certification and these provisions for a period of not less than two years. 

A permitted entity may submit a request to a database or similar resource only:

>>Pursuant to the written, including electronic, consent received by a permitted entity from the individual who is the subject of the request; and 

>>In connection with a credit transaction or any circumstance described in the Fair Credit Reporting Act. 

For a permitted entity to use the consent of an individual received electronically, the permitted entity must obtain the individual’s electronic signature, as defined by the Electronic Signatures in Global and National Commerce Act. 

No provision of law or requirement will prevent the use of electronic consent for purposes of these provisions or for use in any other consent based verification under the discretion of the Commissioner. 

Protecting Tenants at Foreclosure

Certain notification and eviction requirements for renters living in foreclosed properties have been reinstated with the repeal of sunset provisions of the Protecting Tenants at Foreclosure Act.

Remediating Lead and Asbestos Hazards

The Secretary of the Treasury may now use loan guarantees and credit enhancements to facilitate loan modifications to remediate lead and asbestos hazards in residential properties.

Property Assessed Clean Energy (“PACE”) Financing

“PACE financing” means financing to cover the costs of home improvements that result in a tax assessment on the real property of the consumer.

The CFPB must prescribe regulations that require a creditor to evaluate a consumer’s ability to repay with respect to PACE financing.

Protecting Veterans from Predatory Lending

A loan to a veteran for the refinance of a loan to purchase or construct a house may not be guaranteed or insured unless:

>>The issuer of the refinanced loan provides the Department of Veterans Affairs (“VA”) with a certification of the recoupment period for fees, closing costs, and any expenses (other than taxes, amounts held in escrow, and certain fees) that would be incurred by the borrower in the refinancing of the loan; 

>>All of the fees and incurred costs are scheduled to be recouped on or before the date that is 36 months after the date of loan issuance; and 

>>The recoupment is calculated through lower regular monthly payments (other than taxes, amounts held in escrow, and certain fees) as a result of the refinanced loan. 

A loan to a veteran for the refinance of a loan to purchase or construct a house may not be guaranteed or insured unless:

>>The issuer of the refinanced loan provides the borrower with a net tangible benefit test; 

>>In a case in which the original loan had a fixed rate mortgage interest rate and the refinanced loan will have a fixed rate mortgage interest rate, the refinanced loan has a mortgage interest rate that is not less than 50 basis points less than the previous loan; 

>>In a case in which the original loan had a fixed rate mortgage interest rate and the refinanced loan will have an adjustable rate mortgage interest rate, the refinanced loan has a mortgage interest rate that is not less than 200 basis points less than the previous loan; and 

>>The lower interest rate is not produced solely from discount points, unless:

A. Such points are paid at closing; and 

B. Such points are not added to the principal loan amount, unless:

1.) For discount point amounts that are less than or equal to one discount point, the resulting loan balance after any fees and expenses allows the property with respect to which the loan was issued to maintain a loan to value ratio of 100 percent or less; and 

2.) For discount point amounts that are greater than one discount point, the resulting loan balance after any fees and expenses allows the property with respect to which the loan was issued to maintain a loan to value ratio of 90 percent or less. 

A loan to a veteran to refinance a loan to purchase or construct a house may not be guaranteed or insured until the date that is the later of:

>>The date that is 210 days after the date on which the first monthly payment is made on the loan; and 

>>The date on which the sixth monthly payment is made on the loan. 

The above provisions do not apply in a case of a refinance loan in which the amount of the principal for the new loan to be guaranteed or insured is larger than the payoff amount of the refinanced loan. 

On May 25, 2018, VA issued a Policy Guidance Update: VA Refinance Loan and the Economic Growth, Regulatory Relief and Consumer Protection Act discussing the Act and its design to protect veterans from predatory lending practices known as “loan churning” or “serial refinancing.”

The Government National Mortgage Association may not guarantee the timely payment of principal and interest on a security that is backed by a refinance mortgage insured or guaranteed by VA and that was refinanced until the later of the date that is 210 days after the date on which the first monthly payment is made on the mortgage being refinanced and the date on which 6 full monthly payments have been made on the mortgage being refinanced. 

Credit Score Competition

Fannie Mae and Freddie Mac are required to evaluate other credit models besides FICO for credit scoring to determine whether they may be used for underwriting decisions.

Foreclosure Relief and Extension for Servicemembers

A legal action to enforce a real estate debt against a servicemember on active duty or active service may be stopped by a court if it occurs within one year from the servicemember’s end of active service. 

Further Reforms?

There is speculation that the Act is not the last reform to Dodd-Frank that we will see. Such speculation became reality with the passage of the “JOBS and Investor Confidence Act of 2018” (S.488) which had strong bi-partisan support. The TRID Improvement Act (S.2490) is pending legislation addressing changes for title insurance premiums which may be discounted as allowed by state regulation. 

With these bills, there will be more reforms to Dodd-Frank; however, future legislative activity may depend upon mid-term elections.

This article provides an overview of part of the Act by Asurity Technologies based on our understanding of the Act and is not intended to and should not be considered legal advice. 

About The Author

Vendor Offers Enhanced ADA Compliance

Roostify updated its technology so aspects of its application platform are now accessible for customers with disabilities. Roostify is certified to Web Compatibility and Accessibility Guidelines (WCAG) 2.0, Level AA, enabling lenders to offer an Americans with Disabilities Act-compliant loan experience to their applicants. Homebuyers and homeowners can now take advantage of comprehensive screen reader usability, color contrast/font usage, enlarged display performance and keyboard controls throughout their home loan process.


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“We’re proud to have built a platform that meets the stringent AA requirements and extends the Roostify benefits of a faster, lower-anxiety loan process to homebuyers and homeowners of all abilities,” Sandeep Aji, VP of Products, Roostify. 


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The company’s consumer experience was recently certified by an independent third-party as being WCAG 2.0, Level AA-compliant. The AA designation represents a standard of accessibility for all users, including people with limited or no vision, limited or no hearing, colorblindness and limited mobility. 


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Some of the design elements incorporated into the platform that support those with disabilities include:

>>The mortgage application allows users to navigate the system using only using their keyboard;

>>Text and images can be resized without the user losing any information or their place in the application;

>>Text and images offer sufficient contrast between foreground and background color combinations for those with visual limitations;

>>Navigational aids exist throughout the application from beginning to end.

The designation is the culmination of a long-term effort that began with the development of the company’s recently-unveiled Roostify Atomic design system.

“From the very beginning, we approached Roostify Atomic with accessibility in mind,” explained Aji. “One of our core tenets of product design is inclusion – we want to improve the loan process for all consumers. Roostify Atomic gave us an opportunity to build an experience that was fully accessible by anyone trying to buy or refinance a home. What’s more, accessible design is simply good design, and the WCAG-compliant platform offers a better experience for users with and without disabilities.”

CRA Compliance Remains A Big Deal

While the Fed is looking at relaxing CRA regulations, 95 percent of bank lenders who responded to a recent STRATMOR survey on CRA and LMI lending indicated that complying with CRA requirements is and will continue to be a very important part of bank mortgage lending.


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In the November issue of STRATMOR’s Insights report, bank-owned mortgage expert and STRATMOR Principal Tom Finnegan analyzes the survey data and reports his findings in,”  CRA Lending—Bank Perspectives Today and Ideas for Tomorrow.” Finnegan identifies six notable lender perspectives in the analysis and provides his insight into the details.


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“Bank lenders have a strong focus on the CRA, and they have put in place formal governance structures to assure compliance,” says Finnegan. “While two-thirds of our survey respondents agree that changes are needed, they want changes to the CRA to be made with the underlying goal clearly in mind—encourage the extension of mortgage credit that advances sustainable homeownership for their customers in their communities.”


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Finnegan outlines six perspectives on CRA lending from the survey data, including two surprises. First, the majority of responding banks believe that CRA lending is profitable and the majority don’t have specific CRA/LMI marketing budgets.

“We often hear that loans to low and moderate income (LMI) borrowers and in LMI areas are a loss leader and that banks can’t make money serving these customers,” says Finnegan. “In our survey, however, 61 percent of the respondents said their CRA/LMI lending is profitable, most without inclusion of any net interest income from retaining ownership of some CRA loans in the bank’s mortgage portfolio. A very high percentage of responding lenders originate FHA and VA mortgages as well as low down payment conventional mortgages. Since government loans can be especially profitable to originate, this type of production is likely contributing to the opinion being expressed.”

Second, “More than half of respondents indicated they have no specific CRA/LMI marketing budget, which is surprising given the level of focus on CRA lending,” says Finnegan. “This may be due to a view that bank institutional advertising is a key component of LMI marketing — typically, marketing activities are a shared responsibility between the mortgage lending group and corporate marketing. However, this approach appears to be inconsistent with overall bank goals for CRA compliance and may be an area where many banks can improve.”

The article concludes with a summary of what lenders would like considered as part of potential CRA changes.

In a second Insights article, “The Borrower Experience: Little Things Done Right,” MortgageSAT Director Mike Seminari asks the question: “How important is it to call the borrower prior to closing?’ Seminari explains that communicating closing numbers and details is as important as initial communications about the loan process. He notes that when the lender contacts the borrower prior to closing, the Net Promoter Score (NPS) is a very good 81, but if the lender fails to do this, their NPS score drops dramatically, from 81 to -19. Seminari offers four tips lenders can use to make sure borrowers are contacted with closing numbers and details and generate high Net Promoter Scores.

Click here to download the November 2018 edition of STRATMOR Insights for much more.

About The Author

CUNA Mutual Group Acquires CSi

CUNA Mutual Group announced the acquisition of Grand Rapids, Mich.-based Compliance Systems, Inc., a privately-held technology company specializing in compliance technology for financial services, to expand the company’s lending technology capabilities.


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Compliance Systems is a provider of financial transaction technology and compliance expertise. The company provides technology that enables delivery of loan, deposit, and other transaction content in adherence with compliance regulations. Compliance Systems’ solutions complement CUNA Mutual Group’s long-running LOANLINER business that credit unions utilize to stay on top of regulatory changes related to their transaction content.


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“Our vision is to transform and modernize our existing document services, elevating our ability to support the needs of credit unions through a simpler and more accessible solution for our customers,” said Robert N. Trunzo, CUNA Mutual Group president/CEO. “At the same time, Compliance Systems will continue to expand and grow within the banking and lending industry that they serve today.”


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With more than 25 years of experience, Compliance Systems currently supports content configuration, data analytics, and compliance risk management for more than 1,400 U.S. financial institutions with a warranty to cover all 50 states and the District of Columbia.

“The opportunity to bring our solutions to more than 5,600 credit unions, on top of our current growth trajectory in the industry, provides us with a path to grow very rapidly,” said Dennis Adams, president/CEO, Compliance Systems.