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Lenders Should Be Aware Of This …

As a homeowner, how would you like to pay less in property taxes, or even not have to pay those taxes at all? Many homeowners and lenders are familiar with the term exemption. It’s a discount or benefit given for meeting certain requirements. Common examples are a homestead or primary residence exemption, usually a credit applied to taxes if the property being assessed is where the borrower lives. Other common exemptions are disability or disabled veteran, given to people with disabilities or who have served in the military and are now disabled. Exemptions are also usually given to people who are 65 years of age or older, or if the property is used for a special purpose, such as agriculture. Exemptions like these help people who may have trouble paying their taxes keep their properties. Exemptions also lessen the amount that a mortgage company will have to pay if it’s an escrowed account.

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The financial effect of these exemptions can be substantial. Some states will give a large credit for the exemptions. For instance, if the property is a combined Homestead and Disabled or Homestead and over 65 status, it surpasses the taxes that are assessed to the property and the borrower does not have to pay property taxes. Sometimes, like in Texas, people with certain exemptions can qualify to have their taxes deferred, so the taxes will not have to be paid taxes until they move, pass away, or try to sell the property. People in Texas also can enroll in a special installment plan. In other situations, the exemption provides a credit that lowers the total taxes that must be paid. The requirements, benefits and application process for the exemptions can vary from state to state, and often local agencies check yearly to see if the exemption still applies. An example would be checking a property with an agricultural exemption to determine the last time there was actually farming on the property). It’s always best to check with the website of each state to understand the nuances of each exemption.

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If the county discovers that a property did not qualify for the exemptions granted, a reassessment can occur. When this happens, the taxes that would have been owed if the exemption was not applied become due. As a result, the property will suddenly have delinquent taxes that lenders were not aware of and the consequences of these delinquencies can range from having extra penalties and interest added, to possible property loss depending on how the county manages delinquencies.

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It’s always beneficial for lenders to be vigilant and pay attention to what is happening with the properties on which they have issued loans. If a borrower violates a requirement for an exemption, such as not farming on land with an agricultural exemption or filing a Homestead exemption even though it’s being used as rental property or for commercial use, the lender will ultimately end up paying more or even losing the property. One way for lenders/servicers to stay on top of this information is to stay in touch with the county tax offices and assessors and pay attention to any correspondence received from them. This can be a time consuming task. If lenders do not have time to constantly monitor this information, working with a business partner that has employees trained to be experts in tax laws would be prudent. Lenders should look at keeping up with exemptions as protecting their investment and saving themselves from unwanted penalties.

About The Author

Neil Gantan

Neil Gantan is a delinquency processor at LERETA, LLC and has worked on delinquent property tax research for the last six years. He has a Bachelor’s of Science in Business Administration from Cal-State Long Beach and has participated in 6-Sigma projects and has a 6-Sigma Green Belt Certification.

Expanding Affordable Homeownership With Housing Counselor Support

It is not new news that market constraints affect minority homeownership. Rising interest rates, tightened eligibility requirements, higher prices and origination costs are converging to lower mortgage origination projections for 2018. These and other factors will have an inordinate effect on minorities and low-to-moderate income borrowers particularly in underserved markets and rural areas.

According to a recent analysis by Zillow, black and Hispanic renters are finding it more difficult to save for the required down payment for a home purchase. Essentially, Zillow determined that high rental rates are taking such a large bite out of income that it is materially affecting the ability for these groups to save money for a down payment on a home.

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Recent Home Mortgage Disclosure Act (HMDA) data show that the percentage of black applicants declined for a mortgage was at a higher-than-average rate.

Despite the lowest industry declination rate in 20 years – 9.8 percent in 2017 compared to 18.1 percent in 2007 – black applicants were turned-down to the tune of 20 percent in 2017.

Programs Abound

Despite these dismal results and pessimistic expectations, there is an abundance of affordable mortgage lending programs at the local, state and federal levels. Community Reinvestment Act (CRA) requirements provide additional stimulus for banks to participate in such programs. All of these programs require pre-purchase housing counseling and education by HUD-certified housing counselors to ensure that the applicant has a successful homeownership experience and is prepared for unanticipated life events that may disrupt the ability to pay.

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There is also an emerging trend to deploy proactive post-purchase counseling protocols for at least a year after affordable loans originate to help new homeowners when turbulence occurs.

Rather than reacting to a problem, this counseling strategy includes constant communication with the homeowner at regular intervals and continuous education about the responsibilities of homeownership. This type of assistance helps new homeowners avoid financial traps and navigate tax and insurance issues, home repair problems or homeowner association dues issues that may surprise new buyers.

Most importantly, it can help homeowners create a budget and maintain financial discipline especially, in the first year of the mortgage when all stakeholders are at the most risk.

These dynamics present a unique opportunity for lenders to embrace housing counseling and integrate the discipline into new efforts to work on a local and national basis to create best-execution models for expanding sustainable homeownership, especially in a purchase market where first-time homebuyers can play a significant role.

Fannie Mae’s HomeReady program and Freddie Mac’s Home Possible program are designed to reach low- to moderate-income (LMI) borrowers in underserved areas and feature more lenient eligibility criteria.

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For instance, under the Fannie Mae HomeReady guidelines while there is a 3 percent down payment requirement, the allowable sources are flexible including authorized down payment programs at the state and local level which will translate into zero-down from the borrower.

Both programs require proof of pre-purchase homeownership preparation. The Fannie Mae requirement may be satisfied if the borrow completes an online education course provided by Framework. However, a particular down payment assistance DPA program used for the HomeReady program may require more personalized counseling.

Fannie Mae also strongly encourages housing counseling by including it in the HomeReady guidelines: “housing counseling for prospective homebuyers effectively expands the pool of eligible homebuyers.”

Best Execution

While the competition for borrowers heats up, lenders must always look for the most cost-effective model to increase homeownership rates. However, the housing counseling component, if not managed correctly, will impose additional costs and time delays to an already costly proposition for originators.

To help make affordable lending actually “affordable,” Hope LoanPort (www.hlp.org) offers a turnkey technology platform to originators that fully integrates HUD-certified housing counselors who provide pre-purchase and post purchase counseling.

This delivery model makes it easy for originators to work with housing counselors for any borrower nationwide to meet housing counseling eligibility requirements both before and after a loan is originated. HLP reports that by implementing a post purchase counseling process for DPA loans, early payment default rates are reduced by 30 percent. An early payment default is equally as devastating for the servicer, lender, investor and insurer as it is for the homeowner.

Social Responsibility

The mortgage banking industry has always been a strong proponent of expanding the pool of eligible borrowers especially for minorities and LMI consumers in underserved markets. The addition of personalized and consistent housing counseling and education has proved to be a major tool in supporting that admirable objective.

The current mortgage finance market is fertile ground for the industry to step up its efforts to collaborate with housing counselors and leverage their abilities to meet this common goal.

About The Author

Camillo Melchiorre

Camillo Melchiorre is President at IndiSoft. Columbia, Md.-based IndiSoft, LLC develops collaborative technology solutions for the financial services industry. Its flagship products, RxOffice Compliance and RxOffice Vendor Management, enhance risk-based assessment and help companies, including servicers and sub-servicers with increased regulatory concerns. The company provides efficient, reliable and scalable solutions for companies that want to remain compliant, effectively manage workflow and maintain a competitive edge.

Why Lenders Should Be Aware of Exemptions

As a homeowner, how would you like to pay less in property taxes, or even not have to pay those taxes at all? Many homeowners and lenders are familiar with the term exemption. It’s a discount or benefit given for meeting certain requirements. Common examples are a homestead or primary residence exemption, usually a credit applied to taxes if the property being assessed is where the borrower lives. Other common exemptions are disability or disabled veteran, given to people with disabilities or who have served in the military and are now disabled. Exemptions are also usually given to people who are 65 years of age or older, or if the property is used for a special purpose, such as agriculture. Exemptions like these help people who may have trouble paying their taxes keep their properties. Exemptions also lessen the amount that a mortgage company will have to pay if it’s an escrowed account.

Featured Sponsors:

 

 
The financial effect of these exemptions can be substantial. Some states will give a large credit for the exemptions. For instance, if the property is a combined Homestead and Disabled or Homestead and over 65 status, it surpasses the taxes that are assessed to the property and the borrower does not have to pay property taxes. Sometimes, like in Texas, people with certain exemptions can qualify to have their taxes deferred, so the taxes will not have to be paid taxes until they move, pass away, or try to sell the property. People in Texas also can enroll in a special installment plan. In other situations, the exemption provides a credit that lowers the total taxes that must be paid. The requirements, benefits and application process for the exemptions can vary from state to state, and often local agencies check yearly to see if the exemption still applies. An example would be checking a property with an agricultural exemption to determine the last time there was actually farming on the property). It’s always best to check with the website of each state to understand the nuances of each exemption.

Featured Sponsors:

 
If the county discovers that a property did not qualify for the exemptions granted, a reassessment can occur. When this happens, the taxes that would have been owed if the exemption was not applied become due. As a result, the property will suddenly have delinquent taxes that lenders were not aware of and the consequences of these delinquencies can range from having extra penalties and interest added, to possible property loss depending on how the county manages delinquencies.

Featured Sponsors:

 
It’s always beneficial for lenders to be vigilant and pay attention to what is happening with the properties on which they have issued loans. If a borrower violates a requirement for an exemption, such as not farming on land with an agricultural exemption or filing a Homestead exemption even though it’s being used as rental property or for commercial use, the lender will ultimately end up paying more or even losing the property. One way for lenders/servicers to stay on top of this information is to stay in touch with the county tax offices and assessors and pay attention to any correspondence received from them. This can be a time consuming task. If lenders do not have time to constantly monitor this information, working with a business partner that has employees trained to be experts in tax laws would be prudent. Lenders should look at keeping up with exemptions as protecting their investment and saving themselves from unwanted penalties.

About The Author

Neil Gantan

Neil Gantan is a delinquency processor at LERETA, LLC and has worked on delinquent property tax research for the last six years. He has a Bachelor’s of Science in Business Administration from Cal-State Long Beach and has participated in 6-Sigma projects and has a 6-Sigma Green Belt Certification.

IndiSoft Taps Mark Sweeney For Chief Technology Officer

IndiSoft, a provider of technology solutions for the financial services industry, has tapped Mark Sweeney for the chief technology officer position. He is responsible for all technical and product strategy, development and support.

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“We are excited to have someone of Mark’s caliber join the IndiSoft team,” said Hans Rusli, CEO of IndiSoft. “We felt that Mark is a great fit for this role based on his experience and commitment to the evolution of technology in business. He is an innovative leader recognized for establishing and continually improving client relationships and developing application strategies.”

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Sweeney has more than 30 years of experience in the technology industry. He was previously senior vice president of service delivery at Bank of America and executive vice president of applications development at Countrywide Home Loans. Sweeney has proven experience in managing large technology organizations and delivering enterprise systems.

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“Mark’s organizational leadership, experience with governance processes, employee satisfaction and organizational metrics programs makes him ideal for this position,” said chairman and founder of IndiSoft, Sanjeev Dahiwadkar.

How Did You And Your Vendors Score?

A regular review of existing relationships with vendors and a look at how a company measures up on managing service level agreements (SLAs) could prevent unwanted surprises and fees as well as ensure a company is in compliance with federal regulations. This exercise will also give companies a chance to review SLAs with vendors. While SLAs are important for all products and services provided by vendors, it is particularly important for the tax services industry because it directly affects borrowers as well as exposes lenders to penalties and interest fees. This review also gives a company the opportunity to determine if the right tracking tools are in place to accurately prove performance results. These are all necessary internal and external practices in this advanced regulatory age.

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Now is the perfect time to review and re-evaluate a company’s processes with internal and external partners. Doing so will provide an opportunity to document and discuss the need for any process and control improvements. Vendors should be excited to partner with a company and make improvements wherever needed. If they are confident in the service they are providing, vendors should have no problem proving that they are the right partner. If they are hesitant to have these discussions, perhaps the company should consider other servicing options.

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Below are a couple of examples to ignite some thought around reviewing SLAs for tax outsourcing practices. Companies should consider what is being monitored along with the controls. More importantly, these points will require a company to think about current processes and controls and how they will support future efforts.

Evaluation example number one – delinquency and research task processing

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>>Determine if the internal team or vendor is processing your delinquent and research items in a timely manner and what provides proof.

>>Determine if the internal team or vendor are “touching” research-related items the day before, or even worse, the day of the SLA expiring. (Note about SLAs: If an item is not “touched” until the day of the SLA expiring, there is a risk of missing the SLA because it could not be resolved the same day due to agency dependencies. So if the vendor or department “touches” the item the last day of the SLA and they cannot resolve the item AND they mark/count the item as “uncontrollable due to agency dependencies,” this would be false or incorrect reporting because it was controllable and failing to review the item until the last minute should count as a fail.)

>>Determine whether the team or vendor is reporting such items as meeting the SLA out of their control due to agency dependencies. If so, can this information be validated?

Evaluation example number two – quality control

>>Consider what percentage of the total population is being reviewed for quality

>>Look at whether the internal team or vendor is able to provide the loan detail for items being reviewed.

>>Determine if they analyze the detailed reasons for the errors and track improvement of these errors going forward.

Additionally, some other things to consider are whether the SLAs truly measure the quality of a vendor’s performance. Are you asking the vendor the right questions? Is the vendor providing meaningful data? If not, this would be a perfect time to determine what the missing elements of their reporting are. A vendor should support these conversations, give a company the opportunity to discuss and partner with them to find solutions that provide results. With some effort and discussion, vendors can directly assist with a reduction in fewer homeowner frustrations and escalated matters.

Not only should a company question any missing elements of vendor reporting, but companies should also hold their business partners accountable for reporting details. While it may not always be easy and may require some follow-up on a company’s behalf, companies need to ensure the data is accurate and provides the oversight to know how vendors are truly servicing a portfolio.

Companies have a right to know and should ask vendors for proof, along with details, showing that the items are being researched and resolved within your standards or expectations. Remember, a servicer’s role is to protect its portfolio and homeowners. Be informed by ensuring the vendor is providing meaningful data and reporting. Now is the time to dig deep into the details and ensure you have a clear understanding of the information that is being provided.

About The Authors

(left to right) Jessica Longman and Karen Stephens

(left to right) Jessica Longman, a vice president and tax operations reporting and payment manager, has been at LERETA for the last 18 years of her 23 years in the mortgage servicing industry. In her tenure, she has managed disbursements, task research, QC, company-wide loss mitigation efforts and processing efficiencies. Longman focuses on strategy, leadership and excels in streamlining processes for the most efficient flow. Karen Stephens, a vice president and outsource manager, has been at LERETA for six years. She has been in the loan servicing and tax service business for 30 years.

Black Knight Looks To Revolutionize Mortgage Servicing

Black Knight, Inc. has introduced LoanSphere Servicing Digital, a powerful and innovative new solution to help mortgage servicers deepen customer relationships and increase retention. LoanSphere Servicing Digital delivers detailed, timely and highly personalized information to customers about the value of their homes and how much wealth can be built from these real estate assets. A consumer-centric solution, this interactive tool gives customers the ability to easily perform tasks and find information related to their mortgages, while providing a platform for continual engagement between servicers and their customers.

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“Our goal with LoanSphere Servicing Digital is to give our servicing clients an engaging, consumer-centric tool for customer retention,” said Anthony Jabbour, CEO of Black Knight. “For many people, a house is the single greatest asset they’ll ever own. With that in mind, and employing a ‘design thinking’ approach, we’ve developed a solution that lets our clients provide their customers with ongoing, detailed information about their loans and homes, as well as the tools to help manage the wealth they have built in their homes.”

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Offering useful information specific to a customer’s mortgage, property and local housing market, LoanSphere Servicing Digital gives customers the tools to make more informed financial decisions related to their homes. In delivering this information, Black Knight draws upon the servicer’s data via the company’s comprehensive, end-to-end LoanSphere MSP system, as well as Black Knight’s industry-leading property records database; advanced analytics; and automated valuation models. The app – which features loan, home and neighborhood dashboards – presents information in a clear, intuitive design, with easy-to-use navigation that has been built for and tested by consumers.

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“Increasing engagement and providing tools that add value are key to deepening the servicer-customer relationship,” said Joe Nackashi, president of Black Knight. “By providing anytime, anywhere access to an array of customer-specific information and functionality, LoanSphere Servicing Digital enhances the consumer’s servicing experience and adds value on an ongoing basis, which results in higher retention rates.”

LoanSphere Servicing Digital provides customers with easy access to specific information about their mortgages, such as type of loan, interest rate and estimated PMI drop date. It allows mortgage customers to make payments, view detailed payment history and perform other self-service functions within the application. Customers can also explore various “what-if” scenarios, including options for building equity more quickly or the relative benefits of paying down or refinancing their loan. In addition, LoanSphere Servicing Digital provides up-to-date and valuable neighborhood information, such as recent sales, local school data and demographics, as well as transaction and lien history on the property.

The white-labeled solution can be branded to match the servicer’s brand identity, and will be offered as both a native mobile app and responsive web design. By providing loan and home information to customers wherever they are, when they need it most, LoanSphere Servicing Digital helps servicers regularly engage customers with insightful, value-add information that enhances the borrower relationship and supports customers’ financial well-being.

About The Author

Tony Garritano

Tony Garritano is chairman and founder at PROGRESS in Lending Association. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker in the mortgage technology space. Starting this association was the next step for someone like Tony, who has dedicated his career to providing mortgage executives with the information needed to make informed technology decisions. He can be reached via e-mail at tony@progressinlending.com.

Surplus Funds: What Mortgage Servicers Can Do To Recover These Funds

All properties owe real estate taxes to their local government agencies. However, some of the real estate tax collecting agencies may also collect various local delinquencies including utility bills (i.e. water, sewer, and trash) and fire district taxes (primarily northeastern states). These taxes pay for roads, schools, and other government operations to keep communities functioning and safe. When taxes owed are not paid, the property is typically sold at tax deed sale or tax lien certificate sale, allowing the government to collect the delinquencies, incurred costs, fees, etc. Once the property is sold, the jurisdiction deducts what is owed in delinquent taxes, fees, etc., and any funds leftover are deemed Surplus or Excess Funds.

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Typically, surplus funds can be recovered by the owner of the property at the time of the tax sale, by the recorded owner of each security deed associated with the property, or by any other party having a recorded equity interest or claim at the time of the tax sale. However, not all states allow the distribution of surplus funds. For those that do, the amount of surplus funds can vary between a few hundred dollars and hundreds of thousands of dollars. For example, Erie County, New York often has millions of dollars in surplus funds owed to thousands of former property owners after a single tax sale.

In the aftermath of the Great Recession, an entire industry dedicated to recovering surplus funds emerged. Throughout the internet, infomercials promise fast money by collecting surplus funds for other people on a contingency basis. They promise a six-figure income while working out of the comfort of your home and will sell you the tools to do it, which is often just a simple list of specific locations with surplus funds.

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Asset recovery companies were created to collect surplus funds for a percentage of the recovery, like collection agencies. These percentages have ranged anywhere from 12 percent all the way up to an astonishing 75 percent. To protect consumers, several agencies have enacted laws to prevent usurious fees. In 2017, Florida limited the total compensation to 12 percent and requires recovery companies to qualify and register as a “surplus trustee” in order to assist homeowners in claiming surplus funds. Regardless, these companies are still aggressively seeking to recover surplus funds. Another key fact is these asset recovery companies are not attorneys and are often not familiar with the laws concerning how to collect surplus funds. This ineptitude has not only caused delays in the distribution of funds but has also caused agencies to require attorney representation and subsequent court proceedings to collect funds, which adds tremendous time and costs to the process.

Surplus fund distribution varies from state to state, and sometimes even differs by agency, but all are usually managed by the county. In some agencies, these funds are automatically sent to the homeowner on record at the time of the sale. In other states, the process is more complex. Jurisdictions are often not in a hurry to distribute these funds because unclaimed funds are escheated to the state if uncollected. So, what can mortgage servicers do to increase their chances of recovering surplus funds?

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1.) Ensure the proper assignment of mortgage is filed timely and accurately to prove interest in the sold property. If the mortgage was not recorded and the county could not locate the homeowner at the time of the tax sale, the unclaimed funds revert to the state. Having valid proof of interest in the property is the first step to attempt to recover the funds, as the notice of surplus funds is sent to the last recorded mortgagee and to the homeowner at the address of the property sold.

2.) Different states/different rules. A solid working relationship with the jurisdiction can make the process go smoother and reduce the cost of claiming surplus funds. Therefore, it is important to partner with an experienced tax servicer who has relationships with property tax jurisdictions throughout the country and is familiar with surplus fund collection requirements.

3.) If the surplus funds case goes to court, having legal representation that is knowledgeable about the collection of surplus funds is key. This type of law can be simple until there are complications. Attorneys who are trained regarding the collection of surplus funds are crucial because they know the decision makers and they know the legal landscape. Changes in the legal landscape surrounding surplus funds, such as the DLT LIST case in Georgia, argues that surplus funds are personal property and any lien against real property does not attach to surplus funds, despite Georgia law allowing the owner of security deeds to submit claims on surplus funds.

4.) Educating appropriate mortgage servicing team members about surplus funds and the mortgage servicers rights to those surplus funds is important. Surplus funds collected can be applied to the outstanding mortgage balance and reduce the loss of the asset, i.e., the property, to the mortgage servicer

No one wants a property lost at tax sale. However, if it happens, mitigating losses by collecting surplus funds can be effective if done properly. With the emergence of recovery firms and “get rich quick” schemes trying to collect surplus funds, the process has become more complex and competitive. Mortgage servicers need to be diligent in collecting the funds in order to mitigate potential losses.

About The Author

Greg Oppenheimer

Greg Oppenheimer is a specialist with LERETA’s Claims and Lost Property Department team processing escalated claims and providing loss mitigation research on properties lost at tax sale. Before becoming part of LERETA, he was on the Client Support team at QBE First where he spearheaded client support issues relating to delinquent property taxes and title curative issues for outsourcing customers. Oppenheimer is a graduate of Dickinson College.

Title: Technology For All, No Really

Amazon opens a grocery store where you do not need to check out. Banks let you transfer money to your friends via your cell phone. You use an app to track everything from your health, to your child’s grades, to the news from around the world. Yet, in the tax service business, we still use fax machines.

So, why hasn’t the tax service industry kept pace with technological development? It’s a simple question with a multitude of complex answers. The foremost reason is the sheer variation from collecting agency to collecting agency across the country. Variations on how the data is consumed play a role as well. Add to that the fact that property tax collection, generally governed by state law, must work within the framework of lending laws, where federal legislation and oversight play a key role.

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In states such as Pennsylvania and New York where taxes are collected at the local level, lack of standardized data collection practices is a big hurdle. Smaller collectors prefer doing things the old-fashioned way with paper bills, single checks for each payment and often fulfilling requests for information through phone contact and yes, sometimes a facsimile. The requirements for how tax information must be requested vary by method, frequency, authorization, timing and cost. For some agencies, when the request for tax payment is scheduled, the data is provided either through an automated email or tax roll at no charge, and the process can be completely automated through file exchange. In other jurisdictions, a requester is only able to supply a list of properties they service as opposed to receiving a full file of the tax roll. Having access to the full tax roll permits the tax service provider to provide data to clients on properties added throughout the tax cycle. Some of these requirements vary due to local practices and some are governed by state or local statute.

The requester only has access to the specific parcels the company intends to pay as opposed to receiving a full file of the tax roll. Some of these requirements vary due to local practices and some are governed by state or local statute.

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The availability of tax billing data via file exchange for the procurement of property tax data needed for payment continues to increase across the country. The cost of data storage, at one time a major barrier for agencies and tax service providers, has decreased at a rapid rate. This builds the foundation for the further use of automation to disseminate tax payment information.

As more and more collecting agencies open their files, industry players must use technology with the ability to receive data in a multitude of formats. That data needs to be stored and be accessible in order to customize output as needed to meet lender requirements satisfying their processes for compliant payment and remittance.

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Despite all the variations, there are new ways to maximize the use of automation to reduce errors and improve availability. First, it is necessary to build the foundation to automate the steps traditionally used by tax service providers to report tax information. Technology available today can mimic those steps once the data is available to remove the elements of manual data entry and the accompanying delivery of reporting. The implementation of optical character recognition technology may help convert the information that is still received by paper to electronic data.

The second and perhaps more challenging step is increasing the availability of data from the agencies. The industry must step up ways to address the remaining agencies that operate using 20th century practices. Some strategies that should be aggressively pursued include: 1.) lobbying more to remove legislative barriers to providing data to service providers, 2.) increasing direct partnerships with the collecting agencies to find solutions toward automation that benefit the collector and the payer, and 3.) establishing strategic alliances with data providers that service the collecting agencies. By building alliances with third-party providers that already have access to the data, the tax service industry can increase electronic data availability without burden to the collectors. Taking these steps may someday help the industry bid adieu to that dusty old fax machine.

About The Author

Jim McGurer

Jim McGurer is a first vice president at LERETA, LLC and is responsible for general oversight on data acquisition and property Search operations. McGurer has 25 years of experience in the mortgage servicing/tax servicing industries.

Enhance Productivity Through Employee Wellness

As we reflect, it comes as no surprise that employers not only in the mortgage but across all industries are concerned with their employees’ health and wellbeing. Healthy employees are generally happy employees, have a better focus and have higher levels of productivity than unhealthy employees. As a result, they experience more success in business. Employee Wellness programs have become incredibly popular during the last few years, offering everything from paid gym memberships to company running groups and yoga classes to having fresh fruit bowls in the break room.

While many employees are currently taking advantage of these wellness programs, there remains a substantial number of non-participants, almost 60 percent according to the HealthFitness survey conducted between 2015 – 2016. What is holding them back? The survey pointed to inconvenient programs options, a non-supportive company culture, plus trust and privacy concerns.

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Employee health does have a significant effect on the success of companies. Employees at many companies in the mortgage industry, especially those in the technology space, have traditionally worked long hours, increased happy hour participation and not eaten a very healthy diet due to the nature of the job. The way an employee feels during the workday does impact his or her productivity and the quality of the work. In addition to the effect on the employee, poor health can actually impact the employer’s share of medical premiums. Employee Wellness programs have become a critical component to improving employee productivity and effectiveness and the company’s bottom line.

Chronic diseases and conditions are common among employees. They are costly, and in many cases, preventable. As reported by the Centers for Disease Control and Prevention (CDC), as of 2012, about 50 percent of all adults had one or more chronic health conditions such as heart disease, cancer, obesity, and diabetes, and 25 percent had two or more chronic health conditions. Between 2011 and 2014, 36 percent of adults were obese.

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When employees experience health issues, productivity and work quality is often compromised. The most obvious impact is the simple matter of showing up to work. When employees experience health issues, their attendance can suffer and service to customers and contributions to company initiatives can often be impacted. The significance of this can be demonstrated in the total estimated productivity related cost of diagnosed diabetes in 2012. The cost was $69 billion in decreased productivity according to the CDC. These productivity costs were a result of employees being absent from work, being less productive while at work, or not being able to come to work at all. In addition to experiencing staffing shortages, poor employee wellness can lead to low energy levels and moodiness, resulting in negative interactions with customers causing decreased sales. Poor interactions with co-workers that can result from a lack of employee wellness can cause even further sub-standard customer service.

The company’s bottom line is greatly affected by the state of employee health in other ways. Employers carry a large share of employee medical expenses by way of the monthly premiums they pay. According to the Bureau of Labor Statistics (BLS) in 2016, private industry employer costs for insurance benefits averaged 8.0 percent of total compensation. According to a 2016 Society for Human Resource Management Survey (HRMS), employers spent an average of $8,669 per employee annually on health care coverage. Chronic diseases account for a large percentage of health care costs in the United States. As reported by the CDC, total annual cardiovascular disease medical expenses were $189.7 billion in 2012-2013. Cancer care cost $157 billion in 2010. Diabetes and obesity have also been identified as chronic diseases common among people in the United States and the direct medical costs are significant. The total estimated direct medical cost of diagnosed diabetes in 2012 was $176 billion, and in 2008, $147 billion for obesity. Annual medical costs for people who were obese were $1,429 higher than those for people of normal weight in 2006. The main point I want to share is this – health insurers assign medical premium rates on employer plans in part based on the claims incurred by the employee population being insured. A company that covers employees with some of these chronic conditions will incur related medical claims and, as a result, significant increases in annual medical premiums.

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Employers can take the reins by working with employees to improve their health by addressing certain health risk behaviors. As reported by the CDC, “Four of these health risk behaviors – lack of exercise or physical activity, poor nutrition, tobacco use, and drinking too much alcohol – cause much of the illness, suffering, and early death related to chronic diseases and conditions.” According to their reporting in 2015, 50 percent of adults did not meet recommendations for aerobic physical activity, and more than one in three adults had at least one type of cardiovascular disease. They also revealed that 40 percent of adults ate fruit less than once a day, and 22 percent ate vegetables with the same frequency, while 90 percent consumed too much sodium. Their reporting also estimated that 15.1 percent of adults smoked, and many adults reported binge drinking an average of four times each month where they averaged eight drinks.

Companies can implement programs to address wellness in the workplace, and enhance the effectiveness of their overall workforce. At LERETA, we have done just that. The foundation of our program rests on our employees completing an annual confidential health questionnaire and biometric screening. We then utilize the results reported by each of our individual work locations to implement program components designed to improve the health behaviors of our employees. Some of the tactics we put into place include:

Confidential Health Coaching – certified health coaches work with employees whose biometric screening results reveal the presence of Metabolic Syndrome to develop strategies for improvement. Metabolic Syndrome exists if you have at least three of the following – high triglycerides (cholesterol), low good cholesterol (HDL), high blood pressure, high blood sugar or high waist size.

Healthy Nutrition Support – we have partnered with a vendor that utilizes the biometric screening results for each employee to suggest healthy recipes for every meal of the day. Employees can simply select a type of food they are interested in, or key into the web portal the ingredients they have on hand in their kitchen to find a recipe that sounds tasty. Employees can then narrow down the recipes to those that can be made in 30 minutes, or ones that are kid friendly for example. They are even directed to local stores where the ingredients are available on sale or that offer home delivery.

Exercise Programs – hosting daily group walks during breaks and lunches to increase energy levels, mobility, with the added benefit of enhancing employee camaraderie have been very well received. We provide fitness trackers to employees to motivate them to increase their daily steps and exercise minutes. They receive wellness-related rewards for achievement, and are proud to “show the off” to their colleagues.

Health Education Workshops – employees are offered virtual seminars on various health topics such as diabetes management, “stretch and flex at your desk” techniques, and stress management strategies.

Wellness Challenges – employees form teams to compete in competitions geared toward fitness, nutrition, stress management, and weight control. Participants get a daily snapshot of the progress of each member on their team to increase the competitive spirit and as a result, healthy behaviors.

Every company should encourage their employees to engage in a wellness program which in turn will also help their bottom line. In exchange for participating in a required number of these wellness activities, one idea that is popular at LERETA includes employees earning a discount on their monthly medical premiums. Overall, the health of every employee is critical to the success of your business and the service that you provide your customers. Health is a state of mind and wellness is a state of being. Which state would you rather your employees have? As the American author Greg Anderson said, “Wellness is not a ‘medical fix’ but a way of living – a lifestyle sensitive and responsive to all the dimensions of body, mind, and spirit, an approach to life we each design to achieve our highest potential for well-being now and forever.”

About The Author

Brian Blake

Brian Blake is First Vice President, Human Resources Director at LERETA. He leads the human resource team for LERETA. He has managed human resource and training functions in a variety of industries, including financial services, retail and healthcare for the last 30 years. Blake has made improving employee wellness a primary focus for the teams at LERETA.

The True Cost Of Buy Vs. Build

The age old question to build or to buy technology solutions seems to be more prominent and perplexing in the modern mortgage banking age than in past.

Once the digital revolution found its way into mortgage finance – despite valiant opposition – it has pushed technology strategy to the top of the agenda at board meetings.

Concerns run the gamut from seeking competitive advantage to regulatory compliance and everything in between. Then add the desire to improve the consumer’s experience.

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Therefore, it is no surprise that technology budgets are the fastest growing component of mortgage bankers’ expense profile during the last two years.

While much has been written about this classic dilemma, and even more money has been spent on consultants to assist in the decision-making process, there is no hard-and-fast template to guarantee the correct decision.

There are, however, some guidelines beyond the standard template that may be worth considering to ease the pain of the process and at least help management ask the right questions.

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Five Stages of Decision Making

In a recent conversation with the COO of a top 50 residential mortgage lender, he likened the decision making process of whether to develop proprietary technology for pre-funding QA and post-closing QC to the five stages of grief; denial, anger, bargaining, depression and acceptance. His honesty was as refreshing as it was revealing as he concluded, “Since we are now in the acceptance stage, you may expect an RFP in three months.”

It was a tortuous process to first recognize a technology solution was needed and then to finally conclude that for their particular situation, buy, not build, was the answer.

The COO went on to explain that one of the lessons he has learned over time regarding technology strategies is that changes in the business environment are often misinterpreted as temporary instead of longer-term solutions, Band-Aids are applied. For example, when the Dodd-Frank legislation passed in 2010, many companies did not appreciate the gravity of the change in federal regulatory oversight. In turn, these companies did not realize the need for technology from a strategic perspective to help with the implementation of Dodd-Frank rules as they should have.

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So, while some people may argue that exigency forced Excel spreadsheets, Access databases and other end-user programs to be deployed, their salve was temporary. The solution was temporary because it delayed a more strategic decision like purchasing software specifically designed for compliance.

Now, even eight years later, many companies are struggling again with decisions to build, buy or outsource regulatory compliance solutions, which go beyond federal to state, agency and investor.

Few of us with any experience in the industry have not been involved in these herculean struggles regarding the choice of a technology solution. And haven’t we all enjoyed providing evidence for the axiom that the time to make a decision is inversely proportional to the desired implementation timeline?

“Hurry up and wait” and “It must be in production by yesterday” are often-heard during group commiseration time.

We all have seen the various formulaic approaches to the buy/build question, which are a necessary part of a complete analysis: ROI, TCO and other metrics that live and die by the assumption.

So where is the edge? What could be done differently in addition to the normal analyses and decision making that will increase the probability of success?

What’s Mine is Mine and What’s Yours is Mine?

Notwithstanding the ROI on building proprietary solutions, a frequent variable that may get overvalued is retaining intellectual property and its corollary, establishing a competitive advantage. However, when it comes to cost in direct expenses and time associated with such an undertaking, companies have historically, and wildly, underestimated these projections.

Many times the build decision is driven by CTO zeal and not the discipline and self-awareness needed to make the best decision. Sometimes it simply comes down to an identity crisis: are we a technology company or a lender?

The CEO of a large correspondent lender explained the issue in the context of retaining and enhancing a legacy LOS or seeking an outside solution. “We have a stellar tech team that is capable of developing just about anything and if given the budget, they will.”

Outside of analytics that everyone uses, these leadership decisions are probably the most critical. It is incumbent upon business leadership to force the issue and really determine the need for proprietary compared to off-the shelf solutions despite the sometimes strong push from internal IT to build.

While IQ (intelligent quotient) is indispensable; EQ (emotional quotient) may be the final differentiator between a boondoggle and a successful initiative.

Key Considerations: Pluses and Minuses

Here are some key factors to consider when developing a strategy to implement new technology:

Third-Party Tech Solution

Plus: These systems are typically written by the vendor with domain expertise in the product they have built.

Plus: Release updates allows all uses to take advantage of ideas from other customers that would be beneficial to all.

Plus: Spread the costs of regulatory items across the entire customer base.

Plus: With multiple customers using the same core package, there is a better chance of one customer finding a bug (not all systems have bugs) that can be fixed.

Plus: Typically, there is a dedicated budget to enhance the system.

Minus: Could be a challenge getting your secret sauce request prioritized because the company must consider its entire customer base for prioritization of enhancements.

Minus: Once installed, the vendor could raise prices, and it could sometimes be difficult to change the application if your company has other pressing needs.

Home Grown

Plus: Typically, any enhancements can be implemented faster

Plus: Your great ideas can remain proprietary to your company and not shared across the industry; however, this is a factor that is only valuable for true differentiators. For example, there is no advantage to having the best bankruptcy solution because the same laws/process apply to everyone.

Minus: If in a highly regulated environment, the company must spend money to stay current with regulations and do so without the help from a third party.

Minus: As organization change occurs, budget allocations can change overtime and if a company does not invest in its homegrown application, it can become an inhibitor over time.

More Cooks in the Kitchen

Another common approach to turn the dichotomy into a trichotomy is to consider using multiple technology providers to deliver a solution. While this presents its own set of headaches, including two integration points that must be maintained and increased operational risk. There may be some benefits to different functional areas having more independence and the ability to apply a domain-specific platform to their world. The mortgage servicing industry is a classic example of this approach especially in the default servicing area where many companies have specialized in technology to assist with non-performing loans and there is now a market with mature products to assist servicers.

This trend is continuing where not only are there more specialized services for residential mortgage servicers available but, third-party service providers have developed enabling technologies to increase benefits. And this trend has gone beyond default servicing and includes other business activities that service bureaus could not provide and developing proprietary technology would be impractical.

For instance, some third-party providers in insurance tracking, loss-draft processing and performing loans that offer such services as bank reconciliation, investor reporting and billing have added technology to their services to bring additional benefits and cost saving to the servicers.

In the end, no matter where you land in determining whether to buy or build, your decision will only be as good as the questions you ask and the leadership strength you exert to coax out the best result.

About The Author

Camillo Melchiorre

Camillo Melchiorre is President at IndiSoft. Columbia, Md.-based IndiSoft, LLC develops collaborative technology solutions for the financial services industry. Its flagship products, RxOffice Compliance and RxOffice Vendor Management, enhance risk-based assessment and help companies, including servicers and sub-servicers with increased regulatory concerns. The company provides efficient, reliable and scalable solutions for companies that want to remain compliant, effectively manage workflow and maintain a competitive edge.