Nothing But Net: Data Security [Part Two]

*Data Security (Part Two)*
**By Randy Schmidt**

***In my last column, I wrote about what a SAS70 can tell you about a prospective vendor.  I also explained how a SAS70 is created and how the vendors themselves decide which policies, procedures and controls are reviewed and tested.  Today, I will try and give you some items to consider when reviewing a particular vendor’s SAS70 or SSAE16 report.

****Ownership – The first thing you want to make sure of is that the company listed in the report is the same one that you are looking to do business with.  Some vendors rely on the SAS70 of their technology or hosting provider thinking that as long as the data center has been reviewed they are covered.  While these audits often show that the data center has proper physical security and the latest in hardware, firewalls and intrusion detection they don’t address whether the technology vendor itself has other policies and procedures in place.

****Organization and Administration – The next thing to look for is whether the company is structured in such a way to facilitate data privacy. Are they organized into separate functional areas to provide adequate separation of duties?  Are periodic background checks performed on all employees?  Are employees bound by non-disclosure and confidentiality agreements?   Do they maintain proper insurance coverage?  By reviewing this section of a SAS70, you can get a pretty good idea of the importance that management puts on data privacy.

****Computer Operations – Another area to look closely at is computer operations.  The three main areas to review are physical security, logical security and business continuity.

****>> Physical Security – Physical security is exactly what it sounds like.  This section should describe how well the organization physically protects your data.  Is the data stored in a locked environment? What level of protection is used?  Lock and key?  Key card? Biometric Scanners? Who has access to this area?  Are proper access logs kept?  Are security measures such as door alarms, motion detectors, surveillance cameras in place? All of these items are important in reviewing physical security.

****>> Logical Security – Logical security describes controls that an organization has put in place to limit logical or electronic access to your data.  Questions to ask when reviewing logical security include: Is data encryption used for data both in transit and in storage?  What password controls are in place?  How often do passwords change?  Is multi-level authentication used?  Do only authorized personnel have access to the data?  Is anti-virus protection in place?  What level of intrusion detection is in place? If threats are detected, is access immediately prevented?

****>> Business Continuity – Another area that should be reviewed is business continuity.  Not only is it important that your data is protected, but it should be equally important that your data is available whenever you need it.  Things to consider here are:  Does the vendor maintain proper data backups?  Are they stored at an offsite location?  Do they have redundant equipment, power and telecommunications in place?  Is there any single point of failure?  Are disaster recovery and business continuity plans in place? Another thing to consider is not only whether the vendor has a disaster recovery and business continuity plan in place, but whether that plan actually fits your needs.  In the event of a data center disaster, how quickly does your data need to be available?  Can you wait 24-48 hours for the vendor to replace equipment and restore data from backups?  Or do you need them to have a hot site to immediately take over?  All of these questions are important when reviewing the operations section of a SAS70.

****Software Implementation, Maintenance and Documentation – One final area to consider is how the vendor handles their software implementation, maintenance and documentation.  Is source code maintained in a version control system?  Are proper change control procedures in place?  Can changes be tracked by project and individual?  Are development, testing and production environments separated to ensure source code integrity?  Are code changes reviewed for vulnerabilities before being moved to production?  Who is allowed to make changes to the production environment?  How often are changes made?  Are all changes properly documented?  Only by having the proper policies and procedures in place can a vendor hope to provide adequate data security.

****As you can see, there are a lot of questions that need to be considered when reviewing a possible technology vendor.   I have tried to touch on a few of the common items that may be of interest to you.  Every institutions list will be different and each company should do their own risk assessment to determine which policies, procedures and controls are important to them.  Remember, a SAS 70 should not be used as a replacement for due diligence but rather a tool to make due diligence faster and easier.

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

Time To eVolve: Structural Improvement Tips

*Structural Improvement Tips For Loan Processing*
**By Nancy Alley**

***I’d assume that many of you, like me, are fans of all things that have to do with home improvement. From magazines and books to TV shows and online perusing, I cannot get enough tips and tricks. A lot of the newer shows are really interesting to me as they no longer just focus on how to stage a house to sell, but rather how to fix it structurally so homeowners can enjoy it for many years.

****This new positioning got me thinking – why is that are so willing to invest money in stop-gap measures but rarely want to invest in truly important, and often necessary, structural changes.

****It is often the same when it comes to technology and how we process loans. I’d be willing to say that everyone in the industry recognizes that processing loans in the traditional paper fashion is inefficient and time-consuming. However, how companies choose to deal with going paperless is greatly varied.

****Some choose to do-it-yourself. They paint their own rooms or try to drywall; basically building new technology in-house. While the results often do have an initial impact, in time the paint starts to chip or the walls start to show seam lines. Having a basic understanding how to do something is often not enough. To ensure technology works as you need it to work today and how you’ll need it to work in the future, you need a technology vendor whose sole focus is the problem you are trying to solve.

****Others choose to cover up problem spots with rugs, tables and drapes. In the mortgage industry, this could be compared to investing in a feature rich solution that looks to have all the bells and whistles but does not have the power or underlying structure to truly support your needs. While the house will have a nice first impression, upon closer inspection the floors still creak and the windows are still drafty.

****Finally, others take the stance that the foundation is key. These are the homeowners who invest in new energy-efficient water and electrical systems, fix the foundation and put on new roofs. In other words, they look to vendors to connect the many disparate parties to serve as the foundation of their electronic initiatives. By investing in a document collaboration solution that leverages intelligent collaboration, these companies will not only see a tangible return on investment but will be better prepared for the future. How? Good question and I have a lot of answers, but for now the top examples would be:

****>> Document collaboration parties that are open and agnostic can ensure your previous investments with various LOS and Doc Prep vendors were worthwhile by integrating with the many disparate technologies you currently use.

****>> Document collaboration solutions can make eDisclosures a reality today and prepare you for eClosings tomorrow.

****>> Document collaboration solutions can help you manage paper, paper-sourced images and electronic documents today, while setting you on the path to a true eMortgage.

****In other words, let’s stop hanging drapes over old, non-efficient, drafty windows, and instead invest in double pane insulated-glass windows. And, let’s stop repainting the ceiling every year to hide signs of water damage and put on a new roof. A little investment upfront today can provide many years of better processing in the future.

Nancy Alley is VP, Strategic Planning at Simplifile. She brings more than 24 years of financial services and mortgage industry experience to her role as the Vice President of Strategic Planning at Simplifile. She has dedicated her career to driving innovation and leveraging technology in the mortgage industry. As a Co-Chair of the eMortgage workgroup at the Mortgage Industry Standards Maintenance Organization (MISMO), Nancy is actively involved in driving adoption of industry standards.

Rethinking Originations: Why Partner?

*Why Partner?*
**By Mark Phlieger**

***As an LOS we are end-to-end, but that doesn’t mean we don’t build partnerships with best-in-class providers. You read about partnerships here and in other outlets all the time. So, why am I talking about it? I don’t think you ever get an inside view into why the partnership was created. So, I want to share one partnership story from my perspective in an effort to inform you about why partnerships are so important to the overall mortgage industry.

****In today’s complex market I believe that a focus on compliance is crucial. In this case, I think a partnership is in order. I can only talk from my experience here. We at Avista decided to partner with a compliance expert in Wolters Kluwer Financial Services. Why did we do this partnership?

****Lenders have told us they are overwhelmed and frustrated with the amount of regulatory change taking place. They need a compliance provider that they can rely on, one with deep and broad regulatory expertise and that is financially stable. We were very comfortable in choosing Wolters Kluwer Financial Services as our compliance partner.

****Wolters Kluwer Financial Services’ regulatory experts have reviewed nearly 40,000 pieces of newly-proposed state and federal legislation relevant to the banking and mortgage industries through the end of October in 2010. Of these, just over 8,000 have been enacted. That’s already up from 2009, when they reviewed 33,500+ pieces of proposed legislation and just over 7,000 were enacted.

****The Dodd-Frank Act, the newly-created Consumer Financial Protection Bureau and the hundreds of implementing rules that will follow within the next several years will have a dramatic impact on mortgage lenders’ businesses. The sheer number of and complexity of the regulatory changes on the horizon is unprecedented and will likely weigh heavily on most lenders. As the regulatory environment continues to grow increasingly complex, lenders are looking for anything that can help them address change rapidly so they don’t slow down in meeting their borrowers’ needs and growing their portfolios. So they are very interested in any product, service or technology that can help them make compliance and risk management easier, faster and more effective. But on top of that, they’re looking for compliance and risk management solutions that can also help them be more competitive. It’s not enough for a solution or service to simply help them meet regulatory requirements or comply with internal policies and guidelines. They want tools and services that can help them operate more efficiently and enhance the borrowers’ experience. And they want to improve their ability to capitalize on growing lending opportunities.

****So, what does this mean for the industry? Compliance is surely important and as a lender you need to keep on top of everything. So, check and double check your provider to make sure they’re on the top of their game. Partnerships are a part of this industry that’s here to stay so I advise that we as vendors and you as lenders take them seriously. They matter.

A longtime leader and technologist for the mortgage lending industry, Mark Phlieger is president and CEO of Avista Solutions, the Charleston, South Carolina- based creator of innovative all-channel, Web-based loan origination systems. Co-founding the company in 2001, Mark has led Avista since its inception and has an impressive record of achievement in pioneering and development in the mortgage technology space. Mark was a team member on the Fannie Mae project that developed the groundbreaking technologies of Desktop Underwriter and Desktop Originator and later became responsible for their implementation and adoption as the industry standard among Fannie Mae lenders. He went on to create Resource Bancshares Mortgage Group’s core Web-based e-business platform, e-RBMG.

The Relevance of BI: What’s A QRM? And Why Should I Care?

*What’s A QRM? And Why Should I Care?*
**By Tyler Sherman**

***As part of the huge Dodd-Frank overhaul, Congress attempted to regulate the mortgage space by introducing the concept of, among other things, a Qualified Residential Mortgage (QRM). What does that mean exactly? Congress says, “The statutory framework for the QRM requires the regulators to evaluate underwriting and product features that historical data indicate result in lower risk of default, including: documentation requirements; monthly payment-to-income standards; payment shock protections; restrictions or prohibitions on negative amortization, interest-only and other risky features; and mortgage insurance coverage or other credit enhancements obtained at origination to the extent they reduce default risk.” If these standards are not met the lender must maintain a greater financial stake, commonly referred to as “skin in the game”, over that loan in case of default.

****For larger institutions, having more skin in the game is not a problem, but for small and mid-tier lenders, it’s a big problem. Many expect that the final definition of what exactly constitutes a QRM will shape or re-shape the mortgage industry going forward. Surely the politicians will figure out the real definition, but in the interim lenders have to be ready to figure out how to ensure compliance with QRM and survival after QRM comes into being. Fortunately there are technologies that can help.

****For example, lenders need to have metrics that tell them which of its loans are slam-dunk QRMs and which may need more work. A clear plan that is supported and enforced using business intelligence (BI) is just what the doctor ordered in this case. Here’s what I mean: If I’m a small mortgage bank I know I can hold 5% of the risk on so many loans each month. From there, I need to come up with a ratio of QRMs to non-QRMs that I can originate monthly. At that point, your BI technology should know what percentage of your loans do and don’t meet QRM guidelines.

****However, technology should and does go further. It’s not just about a monthly report that tells you, Mr. Lender, how well you did in meeting your ratio expectation and your compliance burden. It’s about offering full visibility into the pipeline in real time so you know what business is being done as its being done. From there, you can use BI technology to control that self-imposed ratio. This is important because you don’t want to take away human intellect, but rather you want to enhance the human’s ability to make good decisions. If you’re heavy on non-QRMs in the first half of the month, you want your technology to tell you that so you can ensure that the loans you do in the second half of the month meet the QRM threshold.

****Any time a metric is important, BI comes in handy. Each organization has to expect that it will do some QRM loans and some non-QRM loans. Technology will help the organization meet that ratio.

****Beyond just meeting ratios, BI should also ensure QRM compliance. Your technology should “know” what constitutes a QRM and tell you based on those parameters that this loan is a QRM and this loan is not. How do you do that? Think about it this way: if you know the questions on the test, study for those questions. If we know what the regulations demand, put those key performance indicators into your technology through BI. That protects you from an audit. Using BI you can prove that you followed the rules because BI fully documents all actions. This way BI is helping you meet your QRM ratio, enabling you to remain profitable and ensuring compliance all at the same time.

As co-founder and CEO of Motivity Solutions, Tyler Sherman is responsible for establishing the vision and long-term strategy of the company. Tyler has more than 20 years of sales, marketing, and executive leadership experience across the mortgage and technology industries. Before founding Motivity Solutions, Tyler was a co-founder of Watermark Financial Partners, where he led the sales team to unparalleled productivity and profits. The sales and marketing programs developed by Tyler led Watermark to become one of the largest organizations of its kind. Tyler understands the need for flexible technology that can help companies navigate the inevitable ebbs and flows of any industry. His capabilities for using technology and business intelligence to enhance the sales and marketing functions helps create a sustainable competitive advantage for Motivity’s clientele. Tyler’s operational and executive expertise in running successful companies effectively aligns Motivity’s interests with that of its customers, and his philosophy of creating value for all stakeholders by building long-term relationships through ethical business practices is applied to all aspects of Motivity Solutions. Tyler has a B.S. in Finance and Marketing from the University of Colorado and an MBA from the University of Denver.

Winning The Battle For The Borrower: Meeting The Challenge Of New Regulation

*Meeting The Challenge of New Regulation*
**By Stephen Margrett**

***Regulation. It’s everywhere these days. And on the marketing side of every mortgage company’s operations, as much as any other, it means that management has to take a much more active role in ensuring its brand and its products are correctly and compliantly represented in the marketplace. Communications with prospects, customers and even referral partners—whether driven from the center or by loan originators—must be controlled, but without inhibiting genuine creativity and individual initiative.

****One of the most distinctive features of an enterprise marketing automation solution vs. a traditional CRM, is that it establishes a controlled environment in which ingenuity and enterprise are able to flourish. It does this by providing management with five levels of control over the players in the marketing process.

****All you have to do is decide what degree of control you want to exercise in relation to each of the system’s key functions. For example, you can make sure that loan officers are unable to edit company information or upload unacceptable graphics or run on-demand campaigns that breach corporate guidelines.

****Examples of the levels of management control available in an enterprise marketing automation solution are as follows, working down from the most to the least restrictive:

****Prohibition: Different types of users can be prevented from accessing a system function, or even an entire page, by means of the solutions “permissions” capability.

****Authorization: Marketing materials created by users at lower levels in the corporate hierarchy cannot be implemented until approved at the center

****Alert: A defined set of fields is monitored and changes reported via a feed on the solutions Home page, enabling quick action to remedy any departure from company policy.

****Oversight: Users at higher levels in the corporate hierarchy can “impersonate” users at lower levels, giving management an instant window on the activities of Loan Officers.

****Reporting: The solutions “Reports” module provides information that allows management to hold users at lower levels accountable for their performance.

****The point is that traditional CRM isn’t good enough anymore. Today’s lender needs more. Why? Marketing is more important than ever before, but with all the new regulation it is also more complex.

****If we can all agree that the market is more challenging in terms of hunting for new business, while remaining as efficient as possible and keeping compliant, then we should also agree that this part of the business requires more automation that allows for both more control and more flexibility. Traditional CRM just doesn’t cut it.

Stephen Margrett is CEO of The Turning Point, Inc. The company’s flagship product is MACH3, a mortgage-specific CRM and automated marketing engine. With a master’s degree in consumer behavior from the University of Minnesota, Stephen has been in the field of relationship marketing for more than 25 years. In 1986, he created Europe’s first full-service, data-driven marketing agency and managed it until the mid-1990s, when he moved to the United States. He can be reached via e-mail at

Winning The Battle For The Borrower: Challenges Galore

*Challenges Galore*
**By Judy Margrett**

***Regulatory changes, compliance updates, rate fluctuations, negative equity, foreclosures, defaults, loan modifications, new investor programs, wavering property values, unhappy customers…How many challenges do you need? How are you going to cope when, at the same time, you are being asked to cut back on the means to get things done?

****That’s why it’s more critical than ever to identify high-quality business opportunities—quickly and efficiently—then drive them to the point-of-sale and initiate professional, compliant communications for converting them into clients. It’s equally critical to retain these clients and to maximize their value through repeat business and referrals.

****Where do you find a technology solution that empowers your organization to achieve these key objectives in today’s new lending landscape? Where do you find a solution that helps implement best practices throughout your organization, while maintaining brand consistency and regulatory compliance?

****By integrating all aspects of the marketing process in a rules-based “Business Opportunity Engine,” enterprise marketing automation powers revenue growth and enhances operational efficiency—creating the next level of performance and value across the enterprise.

****An enterprise-class marketing automation solution supports real people doing real jobs. Each player in the process is empowered to focus on what he or she does best. For example, loan officers are freed up to sell mortgages, instead of trying to create marketing materials and execute campaigns, while c-level executives are presented with sophisticated tools for more effective oversight and management.

****Strategy Development. Enterprise marketing automation provides analytics that deliver mission-critical metrics that lay a firm foundation for focused business planning and better decision-making.

****Active Intelligence. All mortgage companies hold databases about their markets, customers, products, operations, etc. enterprise marketing automation leverages this static data into active intelligence across the enterprise.

****Resource Allocation. With superior information about where business is coming from, corporate managers are able to make more profitable use of both human and financial resources.

****Rapid Response. Enterprise marketing automation delivers rules-based intelligence that does much of the user’s thinking for them, enabling quick and effective action to seize opportunities for referrals, repeat sales and cross-sales.

****It’s easy to see where a true “Business Opportunity Engine” can come in handy. The challenges of the day aren’t going to go away, so why not turn them into opportunities?

Judy Margrett is President of The Turning Point, Inc. The company’s flagship product is MACH3, a mortgage-specific CRM and automated marketing engine. With more than 20 years’ experience in mortgage banking, Judy was an early advocate of technology-based marketing solutions, especially for nurturing key business relationships. Recognizing the demand to maximize resources within business enterprises, she works closely with industry leaders to guide The Turning Point’s development of advanced mortgage-specific solutions. She can be reached via e-mail at

Things To Ponder: Does Innovation Ever Happen Anymore?

*Does Innovation Ever Happen Anymore?*
**By Roger Gudobba**

***I remember back in the late 90s when everyone was saying the e-mortgage is only three to five years out. Here we are 20 years later and e-mortgages are still a very small part of the market. As I was thinking about this topic of innovation, I thought I’d do some research to see where we were in the 1990s as compared to where we are today. To this end, I uncovered the Mortgage Banking magazine, March 1991 issue. The cover story was “Technology: More systems, less paper”. One article stated, “There is still a lot of paper out there—no threat to Federal Express is emerging yet from this industry. But then again, change is rarely delivered overnight.” What do you think of the progress in the industry in the 20 years since this issue was published?

****As I am told, the definition of innovation is the process of improving an existing product or service and not, as is commonly assumed, the introduction of something better. Personally, I disagree and believe that innovation is about the introduction of new or different tools or methods, especially as it relates to the mortgage industry. This may be a matter of personal perspective, but when I look back at the significant changes in the industry, like the development of loan origination systems, automated underwriting systems, converting from paper to electronic (more on that later), product and pricing engines; all amount to the introduction of something better rather than just an improvement of an existing product. What was the common thread?

****Each of these innovations took a subset of the overall mortgage loan process and thought “how can we do this better?” They began by looking at the start and the end of the process. You need to determine what the objective is, and what the end result is that you want to achieve. From there, you brainstorm on different ways to achieve those results and ignore how it has always been done in the past. It was thinking outside the box that lead to these innovations.

****Michael Fruhling, Founder and CEO of bfs innovations, Inc., in his article Bridging the Innovation Gap published 3/8/2011 stated:

****“In a 2010 McKinsey survey of over 2,000 corporate executives, 84% said that innovation was very or extremely important to their company’s future growth. However, 40% claimed that they select their new ideas on an ad hoc basis. Further, 57% agreed that while they execute well against the few new ideas that they had… they needed more big ideas.

****Net: most corporate executives believe that innovation is important, but a good number of them don’t appear to dedicate sufficient time, attention and resources to building and maintaining their innovation pipeline. The result of this would appear to be an Innovation Planning Gap.

****The McKinsey survey highlights overall, what Michael sees on a more micro scale. A good number of his R&D colleagues lament their inability to carve out adequate time away from the current business to pursue and develop new opportunities. They are similarly frustrated that they lack a proper forum to serve up their inspirations to their marketing peers to build their interest sufficiently to pursue some of these ideas.

****Many marketing managers have new product development responsibilities in addition to their current business obligations. Time restrictions can cause some to feel pressured to pursue more conservative, expedient opportunities, as opposed to more ambitious concepts with greater potential (but also with greater risk).”

****What does all this mean? For “an innovation, to be effective, it has to be simple and it has to be focused. It should do only one thing, otherwise it confuses. If it is not simple, it won’t work. Everything new runs into trouble; if complicated, it cannot be repaired or fixed. All effective innovations are breathtakingly simple. Indeed, the greatest praise an innovation can receive is for people to say: ‘This is obvious. Why didn’t I think of it?’” —Peter Drucker

****What will 2011 bring? PROGRESS in Lending honored five top innovations in 2010. I am honored to be a judge for the competition. Some of the entries were very impressive. I hope to see even more impressive entries as we work toward Innovations 2011. I’m waiting…

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

Magazine Column

*Business Strategies: An Enemy Called Average*

**By Michael Hammond**

***There are many things that have been said about today’s mortgage market but words like thriving,

booming and easy are not among them. In order to compete and grow in today’s changing markets

and ultra competitive environment, companies must foster a competitive spirit. It is imperative

to instill a commitment to excellence within their organization if they are going to be able to grow.

****The major roadblock to achieving this is what I call, “an enemy called average.” What does that

mean? People are fine with just getting by. Society has taught some that it’s ok to do the bare minimum.

These people think that they are entitled to certain things, so they don’t strive for more. As a

result, they become content with just getting by and doing just what’s expected and nothing more.

When you’re average, that detracts from you ever becoming great. You don’t have that competitive

spirit or drive, in other words.

****What’s fueling that is a sense of entitlement. People feel like the world owes them something, so

they take things for granted and expect things without having to put forth the work or effort to accomplish

tasks and overall success. Unfortunately, that starts at a young age in this society. Kids are

programmed to get what they want when they want it.

****It’s all about instant gratification.

The bigger problem is that you see this in all aspects

life. As kids grow and participate in sports, for

example, think they’re entitled to playing time, just

because they showed up for practice. It doesn’t matter

if they’ve acquired the requisite skills or put forth the

effort at practice, they feel that they deserve to play and

so do their parents.

****Further, just because Johnny spent an hour doing his homework, doesn’t mean that he understands

the lesson and deserves an A. The school systems are also falling into the trap of being average because

they don’t want to label exceptional effort or kids that need more help. They think they’re helping these

kids, but in reality, they are crippling these kids from working hard. Society wants to protect kids from

disappointment, but disappointment is part of life. What do I mean? Somebody gets the job, somebody

doesn’t. Somebody gets the promotion, somebody doesn’t. By creating this sterile environment, we do

kids a huge disservice.

****So, after a life of having things handed to them, of being protected from criticism, these kids enter

the workforce and just wait for something good to happen to them. They expect and feel like they

deserve a given position or title even if they haven’t proven themselves. They want a lifestyle without

putting out the effort to accomplish that goal. What this does is produce a whole generation in our

workforce today that’s ok with mediocrity.

So, they stop growing. They don’t strive for greatness. They are not looking to excel. They’re not

teachable, and they give up the first time things get tough because they have been insolated and they are

used to getting what they want without doing anything to deserve that reward. When someone critiques

them or out performs them, they don’t know how to respond.

What this leads to is these individuals not being adequately prepared for business or life in

general. They don’t follow through when

things get tough. They shirk accountability.

****In the end, they are not able to self

analyze their situation in order to realize

what needs to be done for them to move

forward. What we have is a generation of

whiners that haven’t learned how to win.

I recently read a book by Keith Cameron

Smith called The 10 Distinctions Between

Winners and Whiners. It was a good

read. Here’s the premise of the book:

****Distinction # 10: Winners take responsibility.

Whiners play the victim.

****Distinction #9: Winners can have what they want. Whiners

want what they cannot have.

****Distinction #8: Winners find a way. Whiners find an excuse.

****Distinction #7: Winners brighten a room by entering. Whiners

brighten a room by leaving.

****Distinction #6: Winners listen twice as much as they talk.

Whiners talk twice as much as they listen.

****Distinction #5: Winners enjoy life’s journey. Whiners put

their joy in the destinations.

****Distinction #4: Winners build friendships. Whiners destroy


****Distinction #3: Winners think big. Whiners think small.

****Distinction #2: Winners are focus-minded. Whiners are


****Distinction #1 Winners create positive meanings. Whiners

create negative meanings.

****As employers, you have to understand that this sense of entitlement

and this enemy called average has permeated the workforce.

If this is not addressed, it can stifle future growth.

****How do you address it? It’s important to create a spirit of

competition and a spirit that strives for excellence. I’m not talking

about perfection, but rather encouraging a spirit that is always

looking to improve. In creating that environment, what it

will deliver to the organization, is an understanding that life is

not fair. Some times you’re going to get the deal even if you

have the best solutions because their CEO is friends with your

competitor’s CEO.

****You can’t always control those situations, but you can always

control how you respond. No one owes you anything, and you’re

not entitled to anything. In other words, you have to go out and

earn everything. Goals and dreams are attained

through hard work and the desire to

never give up until you’ve accomplished

the task at hand.

****Fostering this environment for excellence

puts people in a position to succeed

and a place where they can be teachable

going forward. In doing so, once you start

rewarding performance, when you acknowledge

those that are succeeding and

those people are striving to get their head

above the rest and their efforts are rewarded

as a result, we start breaking the self-entitlement

bubble. We don’t accept average anymore and individuals

learn discipline, accountability, determination, a willingness

to accept critique, a desire to constantly learn, and at the end of

the day it raises everyone’s game. Now that encourages others to

strive for greatness, too.

****Organizations that promote this type of environment demonstrate

that there are no limits on what the individual can accomplish

and what they can contribute to the organization. You

inspire workers to look beyond the boundaries and look outside

the box. That spirit of competition fosters continual growth. In

the end, the company wins and the individual wins because they

are more willing to do whatever it takes to achieve their goals.

Make no mistake, this doesn’t happen overnight. If the company

promotes ongoing learning, sets forth a vision, and reward

risk taking and give incentives to individuals that have gone above

and beyond, they can eliminate this enemy called average.

I know you’re asking; “What does this mean for my business?”

****As a technology vendor, if you foster this environment

instead of having a sales team that just takes orders, is not persistent

and doesn’t follow through, this strategy will get you a

staff that will move past those hurdles and improve your bottom

line as a result.

****As a lender, when this competitive spirit is part of your culture,

your employees will seek ways to produce better quality

loans, increase transparency and they’ll continue to battle for

borrowers even though origination volume is expected to decline

this year.

****Companies must eliminate a sense of entitlement and create

a competitive environment where everyone strives for excellence.

****ABOUT THE AUTHOR: Michael Hammond is chief strategy officer at PROGRESS in Lending Association and the founder and president of

NexLevel Advisors. NexLevel provides solutions in business development, strategic selling, marketing, public relations

and social media. He can be reached at



Progress In Lending
The Place For Thought Leaders And Visionaries

Magazine Column

*Process Improvement: Dare To Change*

**By Tony Garritano**

***I have never experienced such raw emotion over a new piece of regulation. Even the RESPA changes that came into being last year weren’t as maligned by mortgage participants as the new loan officer compensation rule. By listening to bankers on both sides, you would think mortgage lending as we know it will change forever, and that change will be to the detriment of the industry.

****Before I tell you what I think the overall significance of this change should be, let’s frame the argument first. In fact, Larry Cragun frames the background and impact of this new rule perfectly in his blog called Real Estate Undressed. Here’s how he explains it:

****“On August 16, 2010, the Federal Reserve published its final rule on loan originator compensation. The cornerstone of this rule is to preclude loan originators from having any financial interest in the terms or conditions of the loan. In effect, a lender’s compensation of the loan originator (a loan originator is defined as a retail loan officer or a wholesale loan broker) must be pre-determined for any loan, while the lender’s negotiation with the consumer about the terms and conditions can vary as the lender deems necessary in light of market conditions.

****Much confusion exists in the industry. The rules outlined below are from the Federal Reserve. They have not reconciled these rules to what was proposed by the Frank-Dodd Act. While close, there are some differences and you can expect that some of the rules will change.

****This represents a paradigm shift in how loan originators will be compensated.

****The Rule: Mandatory compliance with the rule is required for applications received by creditors on or after April 1, 2011. In general,

****1. The rule provides that no loan originator may receive and no person may pay to a loan originator, directly or indirectly, compensation in any amount based on any of the loan transactions terms or conditions.

****2. Increasing or decreasing a loan originator’s compensation based on transaction terms or conditions are prohibited.

****3. Varying of a loan originator’s compensation based on factors that serve as a method to increase an originator’s compensation for a transaction’s term or conditions also are prohibited.

****4. The Dodd-Frank version, a loan originator can be held personally liable for steering a consumer to a higher rate loan.

****In English…Yield Spread Premiums and Service Release Premiums to originators are gone. Loan originators will no longer receive YSPs or SRPs.

****Permissible Compensation Plans: In general, permissible compensation plans include plans that allow for:

****1. The notion that the loan should be based on a fixed percentage of the amount of credit extended. The percentage may not vary based on transaction terms or conditions.

****2. The compensation should be fixed in advance for each loan of loan originator.

****3. Compensation should be based on a percentage of the loan originator’s applications that result in closed loans

****4. Compensation should also be based on the long-term performance of the loan originator’s loans.

****5. Lastly, compensation should be based on the overall loan volume of loan originators

****Some examples of allowable compensation plans include:

****1. 100% of the origination fee collected is allowable and can vary between originators.

****2. A fixed dollar amount per loan.

****3. A quarterly incentive is allowable.”

****Cragun ends his blog by saying, “More changes are forthcoming. While the Fed has published these rules, they have acknowledged that more changes are forth coming.”

****I wanted to share that blog post in its entirety because it’s the best explanation of this new rule that I’ve seen. It provides clarity. Too bad Cragun isn’t up in Washington helping the politicians write these bills. But I digress.

****Now, let’s examine the points for and against this new rule. As I said earlier, this new rule has people on both sides of the fence expressing very harsh views. Those that are against this new rule say that they are working too hard to give up traditional compensation and this rule is evidence that government is overstepping and over regulating the mortgage space. One blogger (a loan officer who I will not name) put it this way:

****“What Congress is attempting to do is eliminate excessive fees and higher rates to consumers. I have to admit I’ve witnessed loan officers make in excess of 3% on their loans in the old days. We’re capped at 3% total and last year I made 1.08% on all my loans. The bottom line is this: All of us in the business are working harder than ever and making less money.”

****On the other side, you have people cheering this new rule. This blogger (again a loan officer who I will not name) says:

****“I hope this goes through. In my opinion, loan officers should be on a salary basis, just like most other white collar workers are these days. Imagine if a doctor got paid a percentage based on their surgery fees or based on how many prescriptions they wrote. Finally, government is trying to do something about the out-of-control financial industry and this is only one small step in the right direction.”

****What do I think of all this? Hard-working LOs are going to suffer and probably get paid less. That stinks. On the other hand, a system that provides any kind of financial incentive to put a borrower in one loan product over another is flawed and opens the mortgage industry up for people of little character to try and con the system to get a bigger commission even if it is to the detriment of the borrower. This conflict has to be addressed.

****Are the rules being proposed by Washington the best way to make for a more equitable system of LO compensation? Probably not. Lenders are going to now put their heads together to come up with individual programs that both comply with the rule and work for their organization.

****What can we as an industry learn from all this? We can’t wait for Washington to tell us how to conduct business, but we can’t sit around and do nothing to improve the mortgage process and expect to be left alone. The mortgage industry has reached a critical juncture. There’s no turning back, so let’s move ahead together. I suggest that the industry use this rule as a way to rethink its processes and change them for the better.

****Think of it this way: You may like that comfortable sweater that you got as a Christmas gift 10 years ago, but the fact of the matter is that it now has holes and it doesn’t fit right because you’ve gained a few pounds. Do you really need someone to tell you that you can’t wear that sweater out in public anymore? I hope not. The mortgage process is that old sweater. Let it go and get a new and better sweater.

****Let’s look at another analogy. As we all know, there was a time in the history of our planet that the terrain was ruled by dinosaurs. These huge animals quite literally spanned the globe. They were the dominant force. How could anything so widespread literally be wiped out? Simple, there was a shock to their system, most likely a huge asteroid or series of asteroids hit the planet, and they couldn’t adapt.

****The mortgage process is a dinosaur. Right now new regulation is shocking the system. So, we all have to adapt. We can’t rely on the same old/same old and expect to get by. If we as an industry cling to the process of old, we are doomed to extinction. A new and better process coupled with smart technology is emerging. Don’t just stand still and complain, dare to change.

****ABOUT THE AUTHOR: Tony Garritano is Chairman and Founder of PROGRESS in Lending. 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. He can be reached via e-mail at



Progress In Lending
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Powering Today’s Lenders: Loan Quality, Your LOS Could Be The Difference

*Loan Quality: Your LOS Could Be The Difference*
**By Daniel Liggett**

***In today’s market, quality and compliance are major concerns for lenders. They need to comply with a flood of new regulations, avoid potential fines and minimize buyback risk while ensuring loan quality. Lenders understand that investors will not purchase loans that do not meet their strict quality requirements. Lenders are facing these challenges with fewer staff and in an extremely competitive marketplace.

****Loan officers are struggling with the speed and frequency at which these rules and regulations are changing and diligently looking for guidance on how to implement effective solutions that address these concerns. They are looking for automation that addresses investor loan quality requirements and the flood of new rules and regulations.

****Want better loans? Then start with your LOS. The typical system of record for the majority of your loan data is your LOS. To assure investors that your loans are of high quality and saleable, lenders must look for ways to improve the loan process within their LOS. Lenders need to accept that bad data = bad loans = buybacks = loss of profit. Inefficiencies within your lending process cause errors, and increase costs.

****To stay competitive in today’s market, lenders can no longer afford to deal with inefficient and outdated LOS technology. The stakes are simply too high. Regulatory penalties and costly buybacks will significantly cut into profits and overall sustainability of the lending organization.

****A powerful LOS, especially one that delivers automated data validation, can improve loan quality. These systems can provide data edit checks and hard stops within the system to prevent bad data from being introduced into the loan process. Advanced business rules can address and enforce regulatory changes and new investor guidelines, while streamlining the lending process to improve loan quality.

****In addition, tight integration of the LOS with other key third party service providers is critical in improving data and loan quality. Two-way auto data integration avoids rekeying of information, eliminates omission errors and reduces the time and cost of data entry mistakes. Lenders simply cannot accept simple interfaces that do not address or eliminate these challenges.

****If you want to improve loan quality, avoid costly fines and minimize buyback risk then one of the first places you need to look is your LOS. Advanced LOS offerings that utilize the latest technology solutions and also constantly monitor regulatory changes can deliver the type of solution that you need.

****Loan quality can no longer be wishful thinking if you hope to prosper in the lending environment of the future.

Daniel Liggett serves as Director of Client Services for Associated Software Consultants’ PowerLender Loan Origination & Processing System. He has more than 20 years experience in mortgage lending and loan automation systems. Danny oversees the configuration, training, support and project management efforts for loan origination and secondary marketing at ASC and serves as a development and marketing advisor.