Understanding The News: Credit Unions and Community Banks Search For Answers

*Don’t Credit Unions and Community Banks Deserve Help, Too?*
**Talking Loan Quality**

***As more community banks and credit unions beef up their mortgage presence, they need help. Mortgage isn’t their specialty and with all the new rules and regulations, it’s not easy. As a result, we are seeing new technology tools hit the market specifically designed to help this group. For example, PROGRESS in Lending has learned that Aklero Risk Analytics, a provider of automated data and document validity assurance, has unveiled DQx Scan, designed to meet the quality control needs of small lenders; particularly, community banks and credit unions.

****“The aim is to provide these financial institutions with the same quality control capabilities that we provide to the largest lenders and investors,” said Brian K. Fitzpatrick. “They want fast, efficient, high-quality services and that’s what DQx Scan delivers to them.”

****The lender scans the loan documents, names the file, hits send and delivers the documents securely to Aklero, which classifies the documents and extracts critical loan data. An automated deficiency detection analysis is performed on both the documents and the data, before performing the most comprehensive and accurate quality control audit in the industry. In addition, Aklero will provide the scanner to the client.

****“With DQx Scan files never leave the lender’s premises, the files go securely into our platform to begin the classification of loan files, extraction and validation of key data elements, a process that is completed within 24 hours,” said Fitzpatrick. ”Depending on the needs of the lender, Aklero can perform quality control for specific functions such as pre-closing or at any point in the mortgage life cycle.”

****If the lender does not have their files previously scanned, DQx Scan eliminates the hassle of delivering loan files for audit. The solution reduces the time that the quality control process requires, saves money, and provides the most accurate and detailed quality control in the industry, because it validates data from source systems to the data contained in the documents, in a highly automated fashion.

****“These smaller institutions had few options for quickly delivering loan files for audit until now,” said Fitzpatrick. “DQx Scan ensures that smaller institutions will be able to eliminate the security issues and time consumption concerns with delivering loan files for audit.”

Technology Spotlight: UAD Help In Demand

*Appraisal Assistance Needed*
**NREIS Profiled**

***Let’s face it, the appraisal space is changing. As the industry moves toward a more data-centric approach, lenders and others are looking for an automated approach. For example, PROGRESS in Lending has learned that National Real Estate Information Services (NREIS) is in production with, an appraiser-facing portal that scrutinizes appraisal reports for completeness, correctness, consistency, and compliance.

****“We were impressed with the capabilities of which include seamless integration with our existing vendor website, ensuring an automated process and providing compliance with the MISMO XML and Uniform Appraisal Dataset (UAD) protocol that Fannie Mae and Freddie Mac created,” said Chris Behning, CIO of NREIS. “We also wanted to ensure that it’s reliable and flawless in its execution. Given our history in working with ACI, we were very confident in their ability to deliver.”

****“NREIS recognized that could satisfy the delivery requirements of the investors, speed the process, and trim costs,” said George Opelka, senior vice president for sales and marketing at ACI. “ACI offers enterprise-level solutions that allow clients to receive and review appraisal reports, comply with regulations, and deliver appraisals directly to the Uniform Collateral Data Portal (UCDP).”

****ACI has been providing software solutions for the valuation industry for thirty years. ACI offers desktop, tablet, and browser-based industry-standard applications, as well as custom-developed solutions, reaching beyond the foray of the valuation and mortgage services industries to real estate, insurance, and corporate and franchise inspection communities. Headquartered in Palm Coast, Florida, ACI is a division of Verisk Analytics. Verisk Analytics is a provider of risk assessment solutions to professionals in insurance, healthcare, mortgage lending, government, risk management, and human resources.

Market Analysis: Acquisition News

*A New Title And Data Quality Acquisition Deal Inked*
**By Tony Garritano**

***I sound like a broken record when I say now is the time to innovate, but it really is. Now is the time to take a new approach to an old method or strategy. To this end PROGRESS in Lending has learned of a creative acquisition that pledges to revamp the title sector. Charles Sanders, the founder of Urban Lending Solutions, a provider of residential and commercial mortgage products and services, has teamed up with settlement services industry veteran Michael Forgas, formerly CEO of National Real Estate Information Services (NREIS), to acquire RealtyData, a provider of title search productivity solutions. Sanders will serve as President and will hold a majority interest in the company and Forgas will serve as chief executive officer. Here’s the new company’s value proposition:

****“The technology that RealtyData has developed is very exciting and will change the way the title industry operates,” Sanders said. “That made the company a good investment at this time. I’ve known Mike for many years and look forward to working with him.”

****RealtyData technology allows title companies to automate title searches in 900 counties across the nation. In addition, a quality control engine can perform automated quality control on the resulting title commitments, reducing title agent expenses significantly.

****“The title industry has been slow to adapt to technological change, but economic pressure is forcing title agents to seek out tools that will allow them to provide their services more efficiently,” Forgas said. “Our technology allows title agents to not only be more efficient but also improve quality and at favorable prices. We must not forget about quality, especially in this time of significantly increased regulatory oversight.”

****Sanders said he and Forgas will first focus on penetrating deeper into RealtyData’s existing client base, moving good customers beyond simple searches and into the company’s quality control solution. For more information about the company, visit the website at

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

Understanding The News: Joining With HUD

*Partnering Up With HUD*
**Emphasizing Loan Quality**

***As everyone talks about the new government program to get more underwater loans modified, here’s some more government news: Matt Martin Real Estate Management (MMREM), a provider of real estate services, including asset disposition, financial advisory, and mortgage loan loss mitigation services, has been awarded a multi-year contract with its prime contracting partner, STS-MAAG, to provide Mortgage Insurance Endorsement (MIE) processing services for the U.S. Department of Housing and Urban Development (HUD), Denver Homeownership Center (HOC).

****The Mortgage Insurance Endorsement contract was made as part of HUD’s ongoing efforts to ensure effective oversight documentation tied to mortgage loan origination. MMREM, in conjunction with STS-MAAG, will review FHA Case Binders, verify Computerized Home Underwriting Management System (CHUMS) data integrity, and validate all loan closing packages.

****“In partnering with STS-MAAG and FHA, we are helping to meet the US Government’s goals of ensuring proper due diligence on FHA’s growing insured loan portfolio,” said MMREM Vice President of Business Development Noah Martin. “Our Quality Management Solution will help mitigate data quality and process compliance issues and assist in the important effort of keeping HUD’s portfolio strong.”

****“MMREM is well positioned to help government agencies efficiently manage rapidly increasing transaction volumes while overlaying robust risk management programs,” said Andrew Reamer, MMREM president and COO. “MMREM’s experience providing compliant asset management and loss mitigation services in a rapidly changing housing landscape greatly enhances the government’s ability to stabilize neighborhoods on a national scale while reducing costs to the US taxpayer,” he said.

****Matt Martin Real Estate Management (MMREM) is a small business financial services firm focused on delivering financial services to commercial and government clients. The firm, established in 2004, offers asset disposition, financial advisory, loss mitigation and acquisition services. MMREM provides services nationwide through six offices located in Arlington VA (Headquarters), Dallas TX, Austin TX, Philadelphia PA, Irvine, CA, and Atlanta, GA. MMREM is strengthened by a diverse management team, each possessing over 10 years of experience in the financial services field.

****Structured Training Services Inc. (STS) – Mortgage Assistance and Acquisition Group (MAAG), incorporated November 1998, provides property preservation, marketing and outreach, and information dissemination training while continuing to provide information technology and business consulting services to the Federal Government and private sector. The management team has over 40 years of experience and knowledge in developing, implementing, and administering training programs. STS-MAAG is an 8(a) certified and Minority Woman Owned Business (MWOB).

Understanding The News: Embracing The Cloud

*The Cloud Has Finally Come Of Age*
**A New Consulting Service Forms**

***Acris Technology, the software development company behind Mortgage VCO, a full suite of cloud-based software applications and business support resources for mortgage bankers and lenders, has launched a new consulting service designed to help lenders and other financial service companies build an entirely cloud-based virtual corporate office. Named VCO Airlift, the new consulting program will identify the specific steps a lender needs to undertake to run a compliant, scalable, paperless, virtualized mortgage office without the expense and complexity of on-site servers, software, maintenance and upgrades, while taking into account the company’s existing software and business needs. Airlift will also pinpoint the savings in dollars that lenders will realize by freeing themselves from on-site servers and legacy systems and migrating to a virtual environment.

****Airlift specifically leverages lessons gained since Acris Technology has been managing and hosting virtualized platforms since its inception in 2005. Earlier this year, Acris Technology launched VCO Desk, a virtual office platform tailored specifically for the mortgage industry. Through a secure Citrix environment, VCO Desk enables racks of servers to be replaced by an array of hosted, load balanced virtual servers, allowing desktop users remote access to all of a company’s applications and data while providing greater IT power, scalability and security. Developed and refined over the course of years, VCO Desk had been in use privately for years by Laguna Hills, California-based Millennia Mortgage to process over $10 billion in funded loans.

****“Everyone is talking about cloud computing, yet it is not clearly understood by many small and mid-sized lenders in a way that makes it actionable,” says Martin Williams, CEO of Acris Technology. “Because we have ‘been there, done that’ with our own virtual office platform, VCO Desk, it occurred to us that we can guide others who are weighing this transformation but aren’t sure how to get there. We’re calling it VCO Airlift because it is designed to ‘lift’ companies into a cloud-based environment, where so much more is possible.”

****While some additional expense and equipment may be required to build a totally cloud-based mortgage office – such as procuring sufficient high-speed Internet service and configuring dual monitors for staff, for example – virtualization allows lenders to save an enormous amount of money that is normally spent on IT staff and on-site, physical servers, which typically handle email, database, file storage and other functions. In comparison, a virtual corporate office uses secure, remote servers to handle all of a company’s IT needs, while allowing staff to use emails, files, electronic documents, loan origination software and customer relationship management (CRM) tools just as they normally would. In addition, in most cases, lenders do not have to give up any of their current applications or software to place their business in the cloud.

****Once a lender signs up for Airlift, Acris consultants will perform a thorough analysis of the lender’s existing technology infrastructure and software applications and return with a clear set of steps indicating what the lender needs to create a virtual office, what challenges specific to the lender may exist, and the different options that are available. Participants in Airlift are under no obligation to buy Acris Technology products or services, but will benefit from a thorough report and access to online tools and resources for moving their business into the cloud.

****“With mortgage rates at all-time lows, now is an opportune time for many lenders to be considering a cloud-based future,” says Richard Johnston, president of Acris Technology. “Right away, they get greater data storage with automatic backups, better security and unlimited scalability to handle an increase in business – all with lower overhead. But they also get the ability to leverage mobile technology, add remote staff, and more easily manage today’s tough compliance challenges through a single, common platform.”

Market Analysis: A Bright Idea For Servicers

*A Bright Idea For Servicers*
**By Tony Garritano**

***Yesterday I talked about how e-collaboration can benefit servicers. Today, I want to stay on the servicing topic because it’s a huge issue for our industry. Servicers need help. So, when I hear about new innovation happening in the area of servicing, I’m going to bring you that news. PROGRESS in Lending has learned that Wingspan Portfolio Advisors, a special servicer based in the Dallas area, is preparing to launch a new affiliate company, Wingspan Information Technology, LLC, aimed at helping mortgage servicers adapt to new requirements more easily. Here’s the scoop:

****The company makes available the same capabilities that have enabled Wingspan to provide single point of contact (SPOC) access for borrowers since its inception, and brings benefits of its centralized database approach that would otherwise require significant costs for servicers and lenders to achieve. E.J. Kite, Wingspan’s senior vice president of information management, describes the technology as a breakthrough for mid-market servicers and portfolio lenders who are deeply concerned about complying with new regulations. The old way of organizing information among different internal systems and trying to make them work together often creates more problems than it solves, he feels. Wingspan Information Technologies is offering a “single source of truth” approach to information, providing much greater efficiency and real-time transparency for investors and other stakeholders.

****“When everything is in one place, it is far easier to access data and manage it,” Kite explains. “When companies use a centralized approach, everyone stays on the same page, and that includes the borrower interface teams, making single point of contact an integral part of the servicing process.”

****Kite has more than 26 years of experience in mortgage technology, including over two decades at Freddie Mac. Prior to Wingspan, he spent three years at Fannie Mae as Management Information Systems director, working with Dallas area-based technology consultants Miller & Associates, a company specializing in business intelligence and custom software development, to build out the credit performance management reporting infrastructure. A longtime advocate of centralized database structures for mortgage servicing, Kite recommended the strategy to Wingspan founder and CEO Steven Horne while the company was being formed. Using Kite’s “results-oriented approach,” Wingspan created an infrastructure to manage large amounts of complex mortgage information, delivered in a highly useful form for finely directed applications. The approach integrates teams and aligns information and users with great precision.

****“Since day one,” Horne says, “Wingspan Portfolio Advisors has been a single point of contact company, creating very effective relationships with borrowers that have led to our outstanding track record of success.” Kite and Horne are working with Miller & Associates to bring Wingspan Information Technology’s benefits to servicers and lenders with very reasonable costs and implementation timeframes. The technology is highly customizable and leverages web portals for unprecedented access to information by those who need it. “Smaller servicers, including regional banks and credit unions, can achieve a level of servicing sophistication they have not seen before with Wingspan Information Technology’s offering,” says Horne.

****“We are also working with Dedo Interactive, Inc., a Miller & Associates spin-off which specializes in touch/gesture/mobile-based technologies, on a GPS-enabled smart phone application that will prevent or minimize many types of fraud from third parties,” Kite notes. “It authenticates field services providers at property sites, receives their updates and reports instantaneously, and adds transparency to all kinds of property management activities. It even handles location-verified photos from mobile devices to prove that the grass is cut and the hedges are trimmed to specifications.”

****Wingspan Information Technology expects to accept its first clients during the fourth quarter of 2011, with implementations completed in the first quarter of 2012. “We’re excited to be making these technology advancements available to the mortgage community and expect Wingspan Information Technology to provide meaningful assistance to the overall servicing effort,” Kite says. “Wingspan Portfolio Advisors has had great results with the platform, and we look forward to sharing what we have learned.”

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

Market Analysis: Putting The Spotlight On Servicing E-Collaboration

*Putting The Spotlight On Servicing E-Collaboration*
**By Tony Garritano**

***I’m a true believer in electronic collaboration. It just makes sense. Why pick up the phone to order title, credit, the appraisal, etc., when you can put in an electronic order for all those services and more on a centralized system? I think this makes a lot of sense to most people in the mortgage industry, but most don’t think of it in terms of servicing, but rather in terms of origination. Not so, this approach benefits servicers, too, and vendors realize that. For example, PROGRESS in Lending has learned that DRI Management Systems, Inc. has launched the new DRI Office Service Ordering Platform, whereby servicers can automatically execute their orders for services, seamlessly manage the incoming information from providers, and tap a growing list of premiere, in-network vendors. Here’s the scoop:

****Servicers, already hard-pressed to keep up with the volume of problem loans needing attention, will find the Service Ordering Platform in DRI Office of great assistance, says DRI Chief Operating Officer Fred Melgaard. “We built the system to handle as many of the vendor ordering and management tasks as possible,” he explains. “The ordering process eliminates errors and non-reimbursable duplications, and the onboard rules engine makes ordering and acting on the results more automated than ever before. Vendor management tools are built in to maximize those relationships, and the integrated content management system stores and keeps track of things so nothing gets misplaced,” he says.

****The system keeps things as paperless as possible, eliminating the clutter and confusion in servicing operations of all sizes, Melgaard says, and the system is designed to deal with information flowing back from vendors, regardless of format. “By having everything integrated, the workflow becomes more efficient and productive, with impressive cost savings for users,” he says. Melgaard notes that a large national servicer had been spending up to a million dollars a month on duplicated orders alone and urged DRI to prioritize a solution to this problem.

****Steven Horne, CEO of Wingspan Portfolio Advisors, a Dallas area-based special servicer and long time DRI client, thinks that the cost savings offered by the Service Ordering Platform represent more than a simple benefit of using the technology. “The efficiencies and cost savings offered by the Service Ordering Platform will be very significant for our company,” he says. “A primary first lien servicer might find that with their volume, the savings would pay for most if not all of their DRI Office technology costs.”

****DRI’s Melgaard says that the company is adding vendors to its network of participating service providers. Early integrations with the Service Ordering Platform include Epiq Systems’ AACER® (bankruptcy creditor solutions), CoreLogic (automated valuations) and CoreLogic Credco (verifications services and credit reports), Equi-Trax (property valuations), NetDirector (connecting servicer’s systems to the platforms used by their law firms), SWBC (insurance coverage), and others. “We’re looking for the best vendors in the industry,” he notes. “The system benefits them too, by reducing their costs associated with order management and delivery.  All parties can focus on what they do best while we remove transaction friction and keep the default management process running smoothly.”

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

Technology Spotlight: Subprime Flying High Again?

*Nonconforming Is Making A Comeback*
**Quadriga Mortgage Group Profiled**

***Who said nonconforming is dead? The Quadriga Mortgage Group specializes in portfolio funding nonconforming mortgages with low loan to value (LTV) ratios on a wholesale basis, originated through licensed mortgage brokerages and other third party lending professionals. Quadriga manages a mortgage pool that is funded by private investors who are taking advantage of the benefits of investing in a diversified pool of well secured residential mortgages. To further streamline its operation and grow the company has chosen to implement the Mortgage Builder LOS. Here’s why:

****According to Sue Villa, a 30-year mortgage industry veteran and chief underwriter at Quadriga, picking a loan origination software package for the new company was not an easy task, but one made simpler by Mortgage Builder’s design concept.  Her research on LOS systems revealed that Mortgage Builder offered an “everything’s integrated” approach, including the availability of advanced electronic document management (EDM) that would allow Quadriga Mortgage to have a paperless operation from the very beginning. The portal capabilities built into Mortgage Builder allow third parties to submit loans and supporting information instantly online, resulting in faster, more efficient decisions – a great advantage when dealing with more complex loans originated by others.

****“We are a new company but one with generations of experience in mortgages and financial services,” says Ms. Villa. “We wanted an origination technology that could do everything, was already integrated with leading vendors, and would allow us to operate with great efficiency but without necessitating a huge investment. Mortgage Builder’s hosted delivery model let us open our doors with an industry-leading LOS platform while incurring costs transactionally,” she explains. “It is a very advanced, streamlined system and one our brokers will benefit from, as well.”

****Quadriga Mortgage is a unit of Auriga Holdings, a privately held investment firm based in New York City. Recognizing the demand for mortgages from borrowers with less than perfect credit, non-standard income streams or an appetite for investing in rental properties in today’s restrictive underwriting and credit environment, Quadriga Mortgage expects that its offerings will resonate well in its target markets. The company is focusing initially on California, Arizona and Nevada, with nationwide expansion planned.

****“Our model broker is a retail originator specializing in conforming loans but who wants an alternative for good loans that don’t qualify for current government and agency programs,” Ms. Villa says. “Mortgage Builder gives us great flexibility with different loan scenarios and is totally scalable.  With loans available up to $1 million on 65 percent LTVs, there is a pent up demand for us to tap and Mortgage Builder’s features will help us accomplish that.” After two to three years of steady payment history, she expects their loans to refinance into mainstream programs with other conventional lenders.

****Having a good deal of industry experience has its benefits: Ms. Villa knew exactly what she wanted and precisely what she wanted to avoid when considering an LOS system. “With all the details of a startup operation to take care of, the last thing we needed was a complicated technology implementation,” she notes. “Research told me that Mortgage Builder’s customer service was excellent and our experience has verified that their reputation is well deserved. The implementation has been very smooth and there is always someone knowledgeable on hand to help when we need it,” she says. “And that is just how we want people to describe the lending experience at Quadriga Mortgage.”

****Keven Smith, Mortgage Builder’s president and CEO, observes that while Quadriga Mortgage’s market niche is potentially quite sizeable, the larger lenders are leaving it for the smaller companies, at least so far. “We have seen the mortgage qualification pendulum swing far to the opposite side over the last few years, to where many worthy borrowers are now excluded from having access to credit,” he says. “I expect there will be numerous observers watching companies like Quadriga Mortgage to gauge their success as they serve this segment.”

Magazine Column

*Recovery Tips: Dodd-Frank’s Impact*

**By Melanie R. Finkelstein and Marsha L. Williams**

***The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”), which was signed by President Obama on July 21, 2010, radically changes all aspects of the financial industry, especially mortgage lending.  Dodd-Frank created the Consumer Financial Protection Bureau (the “Bureau”) to replace the Federal Agencies in regulating consumer laws. On July 21, 2011, the Bureau assumed the consumer protection governance from the Federal Agencies and will begin issuing, implementing, and enforcing future and existing mortgage lending regulations. 

****No mortgage disclosure law escaped Dodd-Frank’s reach. This article will discuss the disclosures mandated by such laws, such as the Truth-in-Lending Act (“TILA”), the Equal Credit Opportunity Act (“ECOA”), and the Fair Credit Reporting Act (“FCRA”), which were amended by Dodd-Frank and which govern the loan origination process, although servicing disclosures were also affected. 

****Previously under ECOA, a lender was required to promptly mail or deliver a copy of the appraisal after the lender received a borrower’s request for a copy of the report. Under the Dodd-Frank amendments to ECOA, each lender must now furnish to an applicant a copy of the written appraisal or valuation developed in connection with an application for a loan secured by a first lien on a dwelling, whether or not the lender approves the application or the application is incomplete or withdrawn. The lender may require the applicant to pay a reasonable fee as reimbursement to the lender for having the appraisal done.  However, the lender must provide a copy of each written appraisal or valuation at no additional cost to the applicant. The applicant must receive a written notice at application of the right to receive a copy of each written appraisal or valuation.

****Prior to the closing of a residential mortgage loan, a lender must disclose its policy regarding the acceptance of partial payments.  If the lender accepts partial payments, how the payments will be applied to the mortgage and if the payments will be placed in escrow must be disclosed.

****The disclosure will differ for conventional and VA loans and FHA loans due to FHA’s requirements for applying payments.

****At application, the following is required be disclosed:

****>> The aggregate amount of settlement charges, the amount of charges that are included in the loan and the amount of charges the borrower pays at closing, the approximate amount of the wholesale rate of funds, and the aggregate amount of other fees or required payments.

****>> The aggregate amount of fees paid to the mortgage originator in connection with the loan, whether paid by the borrower or the lender.

****>> The total amount of interest that the borrower will pay over the life of the loan as a percentage of the principal of the loan. 

****If a lender requires an escrow/impound account for the payment of all applicable taxes, insurance, and assessments, the borrower must receive written notice of the requirement, as well as details about the account, at least three business days prior to the loan closing or in a timeframe established by regulation.

****If an escrow/impound account is established for a variable rate mortgage loan, the amount of the initial monthly payment of principal and interest and the fully indexed monthly payment of principal and interest plus applicable taxes, insurance, and assessments for both payments must be disclosed at application.

****If an escrow/impound account is not established at closing or if the borrower chooses to then close the account after it is established, the lender must disclose the borrower’s responsibilities for the payment of taxes, insurance, and assessments and the implications of not having the account. 

****An “anti-deficiency law” is the law of any state, which provides that, in the event of foreclosure on the consumer’s residential property securing a mortgage, the consumer is not liable for any deficiency between the sale price obtained on the property through foreclosure and the outstanding balance of the mortgage.

****Alaska, Arizona, California, North Carolina, North Dakota, and Oregon have anti-deficiency laws, and if the loan is a Texas Home Equity loan, there is no deficiency judgment. 

****If a residential mortgage loan is subject to anti-deficiency protection in the above states or if the loan is a Texas Home Equity loan, before the loan closes, the borrower must receive a written notice describing the protection and the significance for the borrower of the loss of the protection.  

****If a lender uses a credit score in making the credit decision, the credit score and related information is now included in the risk-based pricing notice, which is provided to the borrower at closing.

****A “higher-risk mortgage” is a residential mortgage loan with a higher interest rate that is secured by the borrower’s principal dwelling.

****A lender must obtain a written appraisal of the property from a certified or licensed appraiser before making a higher-risk mortgage loan. At application, the borrower must be informed that any appraisal prepared for the mortgage is for the sole use of the lender, and that the borrower may choose to have a separate appraisal conducted at the borrower’s expense. At least three days prior to the loan closing, a lender must provide one copy of the appraisal used for the higher-risk mortgage to the borrower without charge.

****Although few, if any, negative amortization mortgages are currently being originated, if the loan’s payment plan will or may result in negative amortization, the lender must inform the borrower that the pending transaction will or may result in negative amortization and the consequences of negative amortization.

****The Secretary of HUD (the “Secretary”) will take actions as may be necessary to inform potential homebuyers of the availability and importance of obtaining an independent home inspection.  FHA-approved lenders must provide prospective homebuyers, at first contact, the following materials available from HUD in either English or Spanish:

****>> HUD/FHA form entitled “For Your Protection: Get a Home Inspection”.

****>> HUD/FHA booklet entitled “For Your Protection: Get a Home Inspection”.

****>> HUD document entitled “Ten Important Questions to Ask Your Home Inspector”.

****In addition, the Secretary is developing a booklet in English and Spanish to be used for all mortgage loans, which does not reference FHA-insured homes, entitled “For Your Protection: Get a Home Inspection.”

****The Director of the Bureau will prepare a new mortgage information booklet in various languages to assist borrowers in applying for mortgage loans.  The booklet will be distributed to all lenders for distribution to borrowers in the language most appropriate to the borrower along with a list of homeownership counselors.

****Since its passage one year ago, Dodd-Frank has significantly changed the mortgage lending industry. Long after July 21, 2011, as regulations are issued and implemented by the Bureau, we will continue to see changes that will affect the industry.

****ABOUT THE AUTHOR: Melanie R. Finkelstein is an attorney with Middleberg Riddle & Gianna. Finkelstein is a member of the Dallas Bar Association, the Mortgage Bankers Association of America, the Dallas Mortgage Bankers Association, and the Louisiana Bar Association.

****ABOUT THE AUTHOR: Marsha L. Williams is an attorney with Middleberg Riddle & Gianna. Her practice at the firm’s Dallas office is exclusively related to mortgage banking. Williams is a Past President of the Dallas Mortgage Bankers Association, having previously served as Vice President, Treasurer and Chair of the Judiciary/Legislative Committee.



Magazine Column

*Your Voice: A New Deficit Problem*

**By David Lykken**

***Our nation’s fiscal deficit is dominating today’s news. There is another deficit crisis however, that is NOT getting much if any attention. I am referring to the leadership deficit in this country…both in the private and the public sectors.

****Leadership has been a topic of interest to me and I have always enjoyed reading inspiring stories about leaders who overcame serious and complicated problems. One such life and death crisis was the Apollo 13 mission back in 1970. “Houston, we have a problem!” were the now infamous words of Jim Lovell, mission commander, when he radioed NASA’s Mission Control Center in Houston. As you may recall, he was advising Mission Control that they had just experienced a major system failure and they were in serious trouble. The key to a successful outcome to the Apollo 13 mission was an amazing collaborative and creative effort led by strong leadership centered on a core set of mutual values and virtues. 

****To say our industry has experienced a massive “system” failures is an understatement. Leadership was at the core of the problem. Brilliantly chronicling all of this is an amazing new “must read” book “RECKLESS ENDANGERMENT” written by Gretchen Morgenson and Joshua Rosner. This book specifically and in detail reveals how our former leaders, some of which are still in power, unwittingly engineered one of the biggest financial crisis in the history of the US. It exposes how the former leaders of Fannie and Freddie, guys like Jimmy Johnson, Frank Raines, David Maxwell, Tom Donilon, Leland Brendsel, Tim Howard, Tom Nides and Herb Moses, to name a “few” were at the epicenter of what evolved into today’s epic financial crisis. The book provides a clear and detailed timeline of events that were led to our present day financial disaster. It explains how leading politicians and government officials, guys like former President Clinton, Congressman Barney Frank, Senator Christopher Dodd, Representative Maxine Waters, Treasury Secretary Robert Rubin, Deputy Secretary of the US Treasury Larry Summers and on and on, were involved and even helped engineer what has brought our country and our industry to the brink of disaster. And sadly we aren’t even close to the end of this crisis. It is an ever growing and evolving problem all the result of BAD LEADERSHIP… past and present. 

****It is as if our country has contracted an usual and ugly form of cancer. The disease is bad enough but what is more disconcerting than the disease itself is what our “leaders” have prescribed as the “cure”. In fact, their idea of a “cure” may be proving to be more fatal than the disease itself.  

****All of this has caused me to intensify an already strong interest in studying what makes for good leadership. My thought is, “If bad leadership got us in this mess, then good leadership will lead us out.” In my studies, what I’ve found most alarming is that most Americans wouldn’t recognize good leadership if it walked up and slapped them across the face. Our concept of good leadership is in need of serious repair and re-visioning.    

****I have always believed in the concept that pure “truth” is based upon easy to understand principles. Deception, on the other hand, is a process of perverting or twisting “simple truths” and making things unnecessarily complicated. In fact, I have learned that the more elaborate the deception, the more twisted are the facts. To understand good leadership, we need to return to a more simplistic understanding of what makes for a good leader. I have been writing for months on this topic and have arrived at a list of seven characteristics, the “7-C’s”, of what makes for a good leader. They are as follows:

****Character – A simple definition is “the combination of qualities, values, attributes, traits or nature that distinguishes one person or group from another.” A key word is “values”! One’s values are the single greatest determining factor in the make up of a leader. Good character should have always been synonymous with leadership but regrettably, it has not. In the last business cycle, greed seemed to trump good character. I pray that as a result of today’s financial crisis we, the electorate, will be much more focused on character than anything else when selecting future leaders. While leaders will never be perfect, one’s values will be examined more closely and “virtue” will not be viewed as some outdated concept.

****Conviction – A strong leader has to believe deeply in their mission and this belief has to come from their heart, which relates back to character. That is why when following a leader you have to know their character. If you follow someone with deep convictions anchored in a compromised character, the outcome has a much higher probability of failure. Real leaders genuinely believe what they believe and do so from the core of their being. That is why conviction has to be anchored in good character especially when facing the challenges we have ahead.

****Confident – Because of the difficulties that lie ahead, a strong future leader is one who must possess and portray a heart-felt confidence that is ‘birthed’ from a deep conviction in sound principles rather than power. We can spot arrogance from a mile away and people of the right character will not follow the arrogantly over-confident counterfeits of yesterday.

****Charismatic – Future leaders will have a genuine warmth about them and are not the “full-of-themselves” charismatic types of the past. They will be “real” as the expression goes. In other words I would describe them as “relatable” and “magnetic”, but this time for all the right reasons. 

****Clear and Concise – A good leader eliminates confusion, and communicates in such a way as to bring clarity to otherwise confusing matters. LO Compensation is an example of this as there is so much confusion surrounding the coming changes. A strong leader intensely studies whatever issue they are facing and forms a clear plan understandable by all, and then will be able to communicate it concisely.

****Communicator – A good leader is one who has an exceptional ability to communicate, and do so in the clearest and most concise manner possible regardless of complexity of the topic. A leader has a good grasp of all the facts and details and then effectively communicates that knowledge in a way that is easily understood by the greatest number of people. 

****Compassionate – The leaders of tomorrow need to be more compassionate than hard-nosed. Those with a “my-way-or-the-highway” attitude will be rejected! With so many going through such severe hard times, it is essential that the leaders of tomorrow be genuinely compassionate towards those who are struggling without getting caught up in their difficulties. There’s a fine line here that true leaders seem to innately know how to walk.

****I am out of time and space for this article, but challenge everyone that has an interest and/or desire to become a leader to carefully consider the above 7-C’s. And for those of you who don’t feel called to leadership, at least make sure that before going to work for or voting for or following someone proclaiming themselves a leader, use the above seven characteristics as a measuring stick. 

****I firmly believe we, as an industry and as a country, will emerge stronger than ever from this crisis. However, it will ONLY happen if we have strong leaders that lead with the right values. 

****ABOUT THE AUTHOR: David Lykken has his own national weekly radio program called “Lykken On Lending” that can be heard each Monday at Noon Central time by going to As co-founder and Managing Partner of KLS Consulting doing business as Mortgage Banking Solutions, David has over 37 years of management experience as an owner/operator with in depth expertise in real estate finance and housing.