Are Lenders Equipped To Handle Today’s Diverse Homebuyer Population?

Earlier this year, the Pew Research Center announced 10 demographic trends that are shaping the U.S. and the world. At the top of the list was this: “Americans are more racially and ethnically diverse than in the past and the U.S. is projected to be even more diverse in the coming decades.”

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An increasingly diverse population means an increasingly diverse homebuyer population, which means lenders must be prepared to keep pace with the evolving marketplace. This presents an opportunity for improvement and in this effort, lenders can be the leaders in expanding the opportunity for homeownership to everyone.

Creating Internal Diversity

One of the best ways to increase home buying accessibility is to develop a more diverse workforce and business approach. This involves leveraging smarter and more effective approaches to recruiting, training and communicating.

>>Recruiting and Training: Lenders should recruit individuals who exercise a clear understanding of the mortgage industry and their role within it, something that is essential for long term success. Certain intangibles are also important to consider because they are as critical to a lender’s success as the measurable qualities. For instance, recruiting individuals that have a true passion for working with and educating individuals ensures that the right people are leading your efforts to establish and maintain relationships with Realtors and referral partners, and positively influence culturally rich environments. For training, knowledge of processes and regulations are without a doubt a top priority, but your employees should possess a thorough understanding of the demographics and population of the local area, as well as the issues or concerns of prospective borrowers.

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>>Communicating: More diversity in your workforce also facilitates the development of fresh ideas. From a marketing and advertising perspective, things are constantly changing and having a healthy combination of experiences and insights ensures that successful business development strategies evolve appropriately. From a consumer-facing perspective, you’d be surprised how something as simple as employing bilingual loan officers can positively impact a lender’s business and reputation, and eliminating the language and cultural barriers expands the channel of communication and demonstrates a strong commitment to helping others.

When these internal approaches are more strategically aligned, a lender is better positioned to serve borrowers from any walk of life and assume a greater role in educating them on the best mortgage options for their current situation.

Educating the Borrower

During the recession, educational resources weren’t available to many groups of homeowners and financial literacy was not prioritized as it should have been. Because of this, many homeowners did not understand their options and were ill-prepared to manage their situations. As the economy strengthens, more individuals and families are in a position to own homes and lenders must strive to be trusted mortgage partners to support home financing needs.

Borrower-facing efforts, such as educational workshops that target various demographics, are powerful in establishing relationships with an increasingly diverse population in communities across the country whose needs are as unique as they are. For some, paying 20 percent down on a 15-year fixed-rate mortgage may be the most practical approach to owning a home, but as demonstrated by many different loan products, there is no “one-size-fits-all” mortgage. As lenders, we should see ourselves as more than mortgage providers. We should recognize that we are consultative partners on the path to debt-free homeownership and that it is a journey – from prequalification to the final payment. Educating the borrower along the way also removes the intimidation factor of the mortgage process, which provides a positive and enjoyable home buying experience.

The Future of Diversity

It’s easy to get caught up in the business of lending, but it is important to recognize each loan as a family, not a file – and then focus on helping one family at a time. The American dream of homeownership is still very real and by prioritizing recruiting, training and communication strategies with multicultural groups, we will make that dream equally accessibility to everyone. I am confident that, with a concentrated effort from our industry and a willingness to adopt new practices, we will see more positive growth in the coming years.

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Every Vendor Should Embrace MISMO 3.3

MISMO 3.3 is not just a nice-to-do. It matters and more vendors need to embrace it. The results are unquestionable. If you look at the vendors that are embracing this new standard you’ll see the value. For example, International Document Systems (IDS), a nationwide provider of mortgage documents and compliance, and LendingQB, a loan origination software (LOS) solutions provider, are among the first mortgage vendors to successfully implement the MISMO 3.3 data standard for document compliance. The two companies emphasized the importance of utilizing the MISMO 3.3 data standard for TRID compliance and meeting the future needs of the mortgage industry.

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The Mortgage Industry Standards Maintenance Organization (MISMO) was created to provide the mortgage industry with a common language to exchange information in order to streamline processes, improve accuracy and boost investor confidence in mortgages. Through utilization of MISMO standards, the industry has been able to improve access to data exchange between vendors, ultimately benefiting the borrower by lowering the cost to obtain a mortgage loan.

The MISMO 3.0 standard was originally released in 2009, but was updated to version 3.3 in 2014 in order to reflect federal mortgage regulations and reporting requirements implemented by the Consumer Financial Protection Bureau’s (CFPB) TILA RESPA Integrated Disclosure (TRID). The impact of MISMO 3.3 is by and large not visible to lenders, but it provides the framework and backbone for companies like IDS and LendingQB to operate efficiently in the TRID environment.

“Utilizing the latest MISMO standard makes it easier for lenders to produce accurate and compliant mortgage documents,” said Daniel Miller, Vice President of Business Development at IDS. “There is a tremendous amount of data that needs to be transferred between an LOS system and IDS in order to make sure lenders can render an accurate disclosure document. TRID introduced not only new fields, but an entirely different way of tracking fees.”

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The previous Good Faith Estimate (GFE) was a document that provided a static list of fees, each with their own defined data element. MISMO 3.3 is fundamentally different because fees are created dynamically, effectively requiring an infinite number of data elements. Miller commented that many LOS vendors chose not to upgrade to the MISMO 3.3 standard and instead relied on awkward workarounds in order to generate closing documents.

“Many vendors claim they are MISMO 3.3 compliant when in actuality they’re just packaging TRID data inside their existing MISMO 2.6 transmissions,” Miller said. “It may work in the short term, but it will create a cascade effect when there are any changes in the future. It will require us to fix each instance of an LOS vendor’s workaround in order for us to accurately generate documents. This creates an added layer of complexity and is antithetical to the purpose of MISMO.”

LendingQB and IDS worked well in advance of TRID to ensure that the MISMO 3.3 standard was developed and tested, which resulted in a faster and more streamlined TRID implementation process. “MISMO 3.3 is critical for lenders to stay compliant because it allows their technology providers to respond to changes in the regulatory framework more quickly and cost effectively,” said Binh Dang, President of LendingQB. “LendingQB and our best-of-breed technology partners are dedicated to ensuring that our clients have access to the latest technology available.”

Miller revealed that LendingQB is the only non-proprietary LOS system that has successfully implemented the MISMO 3.3 standard with IDS, an achievement that reflects both company’s commitment to ensuring compliance and technology innovation. “LendingQB and IDS made significant investments to ensure that our clients are using the latest technology and data standards,” Miller said. “MISMO 3.3 is essential to TRID, Qualified Mortgage (QM) rules, and any future regulatory changes, such as the new 2018 HMDA reporting requirements. Our efforts are aimed at making it fast and easy for lenders to adapt to industry changes, now and in the future.”

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Technology Adoption In Compliance

Lenders and servicers have used technology to gain the competitive advantage, attract tech-savvy millennials and enjoy efficiency in their loan origination and servicing activities. When it comes to compliance, however, lenders and servicers have come up short in successfully adopting technology.

After Dodd Frank Act in 2010, the rules have changed and the Consumer Financial Protection Bureau (CFPB) has played an important role in enforcing the compliance on the lenders and servicers. Other regulatory bodies such as Office of the Comptroller of the Currency (OCC), Federal Reserve (Fed) etc., have also enforced additional requirements. We have all seen what the result is when there is a failure to meet these regulatory requirements: For example, in May 2014 Bank of America was required to pay $30 million to improve its compliance practices thanks to findings by the OCC.

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A report by CFPB published just last month (June 2016) stresses that lenders and servicers are not effectively investing in technology. And the whole purpose of having this high level of compliance is not helping the borrowers instead it can lead to greater risks. While leaders and servicers should be maximizing technology to aid in compliance efforts, they are only using the basic applications, such as spreadsheets, to manage compliance. Yes, I have actually had people tell me they use and are happy with their run of the mill spreadsheets. Using these applications might solve work for the short term but for the long term, this approach will present more challenges than gains. The mindset of using basic applications until there is an issue or until an agency cites you is misguided and financially risky; however, this is the pervasive thinking in many companies.

Why are companies reluctant to make changes? In short, money. This might save a few dollars in the beginning but when a problem arises or a complaint is lodged, it could cost them a substantial amount in fines. Lenders and servicers who have deep pockets would be able to afford the hefty fines but other companies might find it hard to pay, which can force them to go out of business. This can be avoided by embracing advanced technology in compliance efforts.

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When companies do make the decision to invest in technology, management should consider whether to invest in building new technology from scratch or finding an application that can be used as a Software as a Service (SaaS). One thing companies should keep in mind is that building technology from scratch could take a couple of years, couple of millions of dollars and a dedicated software development team. Working with a provider that already has a viable system developed or one that can be customized or can be implemented in less than a month for far less may be a much wiser choice. When it comes to a decision like this, it becomes pretty obvious what route most companies will take. I’m thinking the SaaS.

The report from CFPB, which clearly highlights the agency’s dissatisfaction of the lack of technology adoption, should be a clear indicator or a warning to those companies who have not yet maximized the use of technology in every aspect of their business. In my opinion, this report as a strong warning shot from the CFPB and one that should not be overlooked. Lenders and servicers today need to set a budget and take heed before it is too late.

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Vendor Integrations: No Longer A Numbers Game

Over the past few years there has been a significant change in philosophy on vendor integrations within LOS technology. The industry’s best service providers are superior in their space and when integrated properly with an LOS bring additional value through more elegant solutions.

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Having 100 or even 500 service provider options doesn’t do a lender much good if the integrations do not include all the important features the vendor offers, or requires a manual review of the results. Lenders are not looking for 10 doc prep vendor options, 5 pricing engines selections and 22 credit bureau pulls to choose from, but would rather have one or two solid, dependable, effective solutions to accurately and efficiently integrate into their everyday workflow. Integrations between an LOS and their third party vendors require countless hours of time, attention, communication and commitment. If an LOS has integrations with 5 or more doc prep vendors, how much time do you think they are really putting into building each of those relationships? How often are they making upgrades when they have so many to work through? What’s their strategy to integrate an optimal workflow or user experience?

Nowadays, lenders are looking for the best providers and are seeking quality over quantity. Loosely bolted on tools are no longer acceptable, instead the demand is for high functioning solutions that are “lights-out” bi-directional interfaces. Exceptional integrations run in a manner that reduces user efforts yet delivers the final results automatically. Vendor integrations demand a large amount of time and attention from both parties. It is the job of the LOS provider to find who is the best at what they do in each of the essentials – pricing engines, document providers, compliance, fraud and fulfillment services – and then build strategic partnerships.

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It’s critical to have bi-directional communication between the two systems. Why is that important to the lender? Efficiency, accuracy, productivity. To maintain compliance, the LOS must always be the data source of record. Today’s best integrations can run automatically; the lender would only address the exception. For flood determinations that means a lender is only alerted when the property requires flood insurance. For compliance that means the lender is alerted when a fee is not allowed or there is a high cost issue. For fraud that means the lender only completes additional due diligence when an alert to identified.

The questions a lender should ask when reviewing their integration options are:

How is the LOS’s relationship with their integrated vendors maintained? How often are they making upgrades and advances to constantly better the solutions? Who is the first line of communication when there is a pain point with the integration – meaning, can you reach out directly to the LOS for solutions, or are you going to be tossed back and forth between the LOS and third-party vendor?

The LOS is the backbone of your lending operations, and there are excellent options to simplify your lending complexities with the right LOS who can support all your needs and provide you with remarkable third party integrations.

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Here’s How You Can Reach Millennials:

Want to know more about Millennials and how to market to them? Here’s a look at vital stats about this demographic—and info about how best to reach it.

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Some 82% of Millennials (people age 18-29) interact with brands or retailers on social media, where 49% follow their favorite brands or retailers, according to the following USC Dornsife infographic.

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To reach Millennials, marketers should consider optimizing mobile. “Mobile is the best way to reach Millennials,” states the infographic. “They have the highest rate of ownership of smartphones of all generations.”

Personalization also matters to them: “85% of Millennials are more likely to make a purchase if it is personalized to their interests, both in store and with digital displays,” according to the infographic.

To find more about marketing to Millennials, check out this infographic:


How To Perfect Your Branding

Every few months there’s another super hero movie hitting theaters. So, when I came across the article “Superhero Strategies for Nailing Your Branding” by Kyle Zagrodzky, I was immediately interested to learn more.

The article argues that “branding” is one of those buzzwords that’s used so often, its meaning has become diluted. People love to talk about branding because it’s a moving target and incredibly hard to do well. Great branding reflects the company’s values, product or service, vibe and attitude. Landing on that perfect projection of your business is difficult to achieve.

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If companies were superheroes, branding would be their names and iconic logos. Each symbolizes its hero and tells a story even before you learn the entire origin tale. A hero’s name—Batman, Green Lantern, Wonder Woman, Captain America—is the first thing you learn. These call signs epitomize heroic identities, clueing you in on what the crusaders do and how they do it. Each symbol is immediately recognizable. Paired with the superhero’s name, it conveys much about the character’s tone, background and style.

That’s solid branding. It’s simple, direct and lightning-fast (just like The Flash). To excel, every business needs that kind of branding.

What defines a great brand?

Brand messaging should be clear, clean and specific. It should project an attitude that illustrates the personality of your product or service, quickly showcasing what you do and what you’re about. It’s the 30- to 60-second elevator pitch condensed to its most basic elements. Your tagline or slogan, logo and colors should use six or fewer words to help people form an accurate picture of who you are. That’s a tall order, made even taller if you’re breaking into an untapped market or introducing a new product.

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Plan your brand’s voice before you commit to it.

Building a brand isn’t as easy as popping up a tent. It’s more like laying a foundation. One small crack can lead to major, house-wise structural issues. It’s the same with marketing strategies built on insufficient branding. Your branding must answer a few basic questions: who you are, what you do, whom you serve and why you’re the best. It’s the most stripped-down version of your story, so it’s important to tell it well. Taking off with a cocktail-napkin idea for a logo and never looking back won’t cut it. Instead, thoughtfully develop the heart of that idea so you can move forward confidently.

Acknowledge your message won’t resonate with everyone.

The strongest brands project a personality. Being crystal clear about who you are means you recognize you can’t expect to attract every potential customer. Is your product or service the most elite, accessible, economic, cutting-edge, high-quality, or time-tested? Knowing your target audience is a big part of defining a winning brand. Take time to understand their needs, drivers and desires, and then project an image that shows you offer exactly what they’ve been looking for. Branding is the opposite of being generic. Don’t try to appeal to everyone at the expense of watering down your company’s distinct personality.

Seek help from outside experts.

You’re passionate enough about your business to give it your all, and that level of ownership can give you binocular vision when it comes to building your brand. A trusted, outsourced partner with solid branding experience can save you a lot of time and resources. Qualified external perspectives can cut the most direct path between your big ideas and the finished branding product. Marketing, public relations and consumer perception play in a specialized arena. Teaming with people who have a track record for launching successful brands can remove stress and wasted energy from the equation. It’s crucial to get your branding right the first time, so don’t be afraid to invest upfront and bring in an expert.

Once you define your brand, stick to it.

There always will be someone with an idea about how to make your branding better. Constructive feedback can elevate your business, but it’s important to stay true to the baseline expressions of your brand. Branding is a key element in a delicate marketing ecosystem. The smallest tweaks can upset the balance you worked so hard to achieve. Rebranding is expensive and can confuse customers. Once you’ve chosen your core messaging, logos, and other key touch points, don’t mess with them unless it’s absolutely necessary. Deciding you should have picked ketchup red instead of mustard yellow or added an extra swoosh to your logo doesn’t meet the test. Once a brand is set, any and all decisions about changing it must be taken seriously.

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Things Continue To Get Better

Data shows the foreclosure inventory declined by 25.9 percent and completed foreclosures declined by 4.9 percent compared with June 2015. The number of completed foreclosures nationwide decreased year over year from 40,000 in June 2015 to 38,000 in June 2016, representing a decrease of 67.5 percent from the peak of 117,835 in September 2010.

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The foreclosure inventory represents the number of homes at some stage of the foreclosure process and completed foreclosures reflect the total number of homes lost to foreclosure. Since the financial crisis began in September 2008, there have been approximately 6.3 million completed foreclosures nationally, and since homeownership rates peaked in the second quarter of 2004, there have been approximately 8.4 million homes lost to foreclosure.

As of June 2016, the national foreclosure inventory included approximately 375,000, or 1.0 percent, of all homes with a mortgage compared with 507,000 homes, or 1.3 percent, in June 2015. The June 2016 foreclosure inventory rate is the lowest for any month since August 2007.

CoreLogic also reports that the number of mortgages in serious delinquency (defined as 90 days or more past due including loans in foreclosure or REO) declined by 21.3 percent from June 2015 to June 2016, with 1.1 million mortgages, or 2.8 percent, in this category. The June 2016 serious delinquency rate is the lowest in nearly nine years, since September 2007.

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“Mortgage loan performance depends on the economic health of local markets, with varied differences even within a state,” said Dr. Frank Nothaft, chief economist for CoreLogic. “Within Texas, the serious delinquency rate in the Dallas metropolitan area has fallen by 0.5 percent from a year earlier, as home prices and employment have continued to rise. The rate in the Midland area, on the other hand, has jumped 0.5 percent, reflecting the weakness in oil production and job loss over the past year.”

“The impact of the inexorable reduction over the past several years in both foreclosure trends and serious delinquencies is driving the long-awaited return to more historic norms for the U.S. housing market,” said Anand Nallathambi, president and CEO of CoreLogic. “We expect the combination of continued home price appreciation of more than 5 percent and rising employment levels in the year ahead will help cement the gains we have had and perhaps accelerate them.”

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