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Technology Spotlight: Lender Cashes In, Gains Efficiency

*Lender Cashes In, Gains Efficiency*
**First Centennial Mortgage Profiled**

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

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

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

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

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

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

Time To eVolve: An Industry Wish List

*An Industry Wish List*
**By Nancy Alley**

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

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

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

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

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

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

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

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

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

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

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

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.

Market Analysis: JP Morgan Gives Tech Vendor Cash Infusion

*JP Morgan Gives Vendor Cash Infusion*
**By Tony Garritano**

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

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

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

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

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

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.

Lykken On Lending: Sorting Out LO Comp

*Sorting Out LO Comp*
**By David Lykken**

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

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

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

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

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

David Lykken has garnered a national reputation as a visionary, entrepreneur and business leader within the mortgage industry. He has also become a regular guest on the FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman, Dave Asman and others. He has been a special guest of Governor Mike Huckabee on FOX News’ #1 weekend rated program “Huckabee”. He has appeared several times on the CBS Evening News, Bloomberg TV & radio, NPR and many radio shows. On matters related to the economy, housing and mortgage lending, David is frequently quoted in leading newspapers across the country as well as the Wall Street Journal and the New York Post. Additionally, David has his own national weekly radio program called “Lykken On Lending” that can be heard each Monday at Noon Central time by going to www.LykkenOnLending.com .

As co-founder and Managing Partner of KLS Consulting doing business as Mortgage Banking Solutions, David Lykken has over 37 years of management experience as an owner/operator with in depth expertise in real estate finance and housing. His knowledge and skills comprise a unique blend of technology and business strategy. Above all else, David loves helping business owners and executives navigate through extremely difficult business circumstances helping them overcome seemingly insurmountable obstacles while rediscovering themselves and their passion for life and living.

Dave is married, has two daughters and currently resides in the beautiful Hill Country of Central Texas near Austin, Texas. David received a bachelor’s degree in 1973 year from Pacific Lutheran University in Tacoma, Washington.

Understanding The News: Many Lenders Miss The Boat When It Comes To Quality Control

*Many Lenders Miss The Boat When It Comes To Quality Control*
**New Research Reveals Critical Flaws**

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

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

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

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

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

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

Market Analysis: Not Everyone Is Doing Poorly

*Not Everyone Is Doing Poorly*
**By Tony Garritano**

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

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

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

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

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

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

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

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

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

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.

Nothing But Net: Channel Integration: A Dynamic Single Online Platform

*Channel Integration: A Dynamic Single Online Lending Platform*
**By Randy Schmidt**

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

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

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

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

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

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

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

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 rschmidt@d-vision.com

Market Analysis: Let’s Solve The REO Problem

*Let’s Solve The REO Problem*
**By Tony Garritano**

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

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

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

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

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.

Understanding The News: Integration Aims To Stop Fraud

*Integration Aims To Stop Fraud*
**A New Alliance Forms**

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

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

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

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

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

Video Insights: Talking Loan Quality

*Talking Loan Quality*

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

httpv://www.youtube.com/watch?v=LS0Lxfwy4ao