National Mortgage Professional Magazine - January 2012

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To learn more about Jim’s perspective, Go to www.iambenchmark.info or call 800-236-1824

Jim McMahanBenchmark President & Partner

I AM BENCHMARKwww.IamBenchmark.info

Success Relationship Dynamic Excellence PositiveAttitude

We are a community of mortgage professionals who are united by the Benchmark Core Values:

"As an industry professional your outcome depends now

more than ever on your team and your foundation that you

align with."

A Special Look at “Managing & Selling REOs”Soaking Up REO Inventory Like a Sponge By Daren Blomquist ..............................................................36

REOs in 2012: They Key Word is “Trust” By David Lykken & Jon Traver ..................................................38

An REO Obstacle Course By Ivan Choi ..............................39

Rehab or Sell “As-Is?” By Cheryl Lang ..............................40

HUD REOs: Six Things Every MLO Needs to Know By Jeff Mifsud ......................................................................42

Managing and Selling REOs in a Flooded Market By Frank Danna....................................................................................43

FeaturesNew Year’s Resolutions By Mary Beth Doyle ........................4

Pursuing Excellence By Casey Cunningham ..........................4

Controlling Credit Risk By Jonathan Foxx ............................8

ValueNation: In Uniformity Lies the Path to Progress By David Rasmussen ............................................................10

The NAMB Perspective ..................................................12

NMP Mortgage Professional of the Month: Brett McGovern, President of Bay Equity Home Loans....................................................................16

For Managers Only: The Management Dilemma By Dave Hershman................................................................18

The Mortgage Battlefield of 2012: A View From the Frontlines By John Walsh ........................20

Credit Repair Still a Threat to Your Mortgage Business By Terry W. Clemans ..................................28

Leadership and Culture: Are Your Model-Matched With Your Current Mortgage Lender? By Drew Waterhouse ............................................................32

Make Real Estate Agents Your Soldiers! By Raymond Bartreau ............................................................35

ColumnsHeard on the Street ........................................................6NMP News Flash: January 2012 ....................................19New to Market ................................................................29NMP Mortgage Professional Resource Registry ..........44NMP Calendar of Events ................................................48

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Bay Equity LLC ................................................ www.bayeq.com ..................................................41

Benchmark Mortgage ...................................... www.iambenchmark.info ..............Inside Front Cover

Best Rate Referrals, LLC .................................... www.bestratereferrals.com ..................................13

Calyx Software ................................................ www.calyxsoftware.com ......................................43

CBC National Bank .......................................... www.cbconnex.com ..............................................9

Elliott and Company Appraisers, Inc................... www.appraisalanywhere.com ................................42

Equity Loans LLC .............................................. www.equityloans.com ..........................................21

Flagstar Wholesale Lending .............................. www.paperless.flagstar.com ......................Back Cover

Freedom Mortgage .......................................... www.fmbranch.com ......................Inside Back Cover

Frost Mortgage Lending Group .......................... www.frostmortgage.com/nmp ..............................24

GSF Funding .................................................... www.gogsf.com ....................................................7

Hometown Lenders .......................................... www.hometownbranch.com ................................29

Icon Residential Lenders, LLC ............................ www.iconwholesale.com ................................5 & 15

Land Home Financial Services .......................... [email protected] ....................................39

Loyalty Express ................................................ www.loyaltyexpress.com ......................................15

Menlo Park Funding ........................................ www.menloparkfunding.com ................................37

Mortgage Brokers Network Corp, Inc. ................ www.mortgagebrokersnetwork.com ......................19

NAMB.............................................................. www.namb.org/legconference ..............................35

NAPMW .......................................................... www.napmw.org ..................................................6

PB Financial Group Corp. .................................. pbfinancialgrp.com ..............................................24

Polaris Home Funding Corp. (Branches) .............. www.polarishfc.com/TimeForAChange ..................25

Polaris Home Funding Corp. (Wholesale) ............ www.polarishfc.com ............................................31

REMN (Real Estate Mortgage Network)................ www.remnwholesale.com ....................................11

Shortsale Speedway.......................................... www.shortsalespeedway.com/freedemo ................30

TMS Funding.................................................... www.tmsfunding.com ..........................................33

Veros Real Estate Solutions .............................. pmc2012.com ......................................................23

National Mortgage Professional Magazine

TABLE OF CONTENTSJanuary 2012 Volume 4, Number 1 Company Web Site Page

PRESORTED STANDARDU.S. POSTAGE PAIDNMP MEDIA CORP.

NMP MEDIA CORP.1220 WANTAGH AVENUEWANTAGH, NEW YORK 11793

A Message From NMP Media Corp.Executive Vice President Andrew T. Berman

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January 2012Volume 4 • Number 1

1220 Wantagh Avenue • Wantagh, NY 11793-2202Phone: (516) 409-5555 / (888) 409-9770

Fax: (516) 409-4600Web site: NationalMortgageProfessional.com

STAFFEric C. Peck

Editor-in-Chief(516) 409-5555, ext. 312

[email protected]

Andrew T. BermanExecutive Vice President(516) 409-5555, ext. 333

[email protected]

Joey ArendtArt Director

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Jon BlakeAdvertising Coordinator(516) 409-5555, ext. 301

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Kelsey DominoExecutive Sales Assistant(516) 409-5555, ext. 316

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ADVERTISINGTo receive any information regarding advertising rates, deadlines and require-ments, please contact Senior National Account Executive Karen Krizman at(516) 409-5555, ext. 326 or e-mail [email protected].

ARTICLE SUBMISSIONS/PRESS RELEASESTo submit any material, including articles and press releases, pleasecontact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or [email protected]. The deadline for submissions is the first ofthe month prior to the target issue.

SUBSCRIPTIONSTo receive subscription information, please call (516) 409-5555, ext.301; e-mail [email protected] or visit www.nationalmort-gageprofessional.com. Any subscription changes may be made to theattention of “Circulation” via fax to (516) 409-4600.

Statements, articles and opinions in National Mortgage Professional Magazineare the responsibility of the authors alone and do not imply the opinion orendorsement of NMP Media Corp., or the officers or members of NationalAssociation of Mortgage Brokers and its State Affiliates (NAMB), NationalAssociation of Professional Mortgage Women (NAPMW), National CreditReporting Association (NCRA) and/or other state mortgage trade associations.

Participation in NAMB, NAPMW, NCRA, and/or other state mortgagetrade associations events, activities and/or publications is available ona non-discriminatory basis and does not reflect the endorsement of theproduct and/or services by NMP Media Corp., NAMB, NAPMW, NCRA,and other state mortgage trade associations.

National Mortgage Professional Magazine, NAMB, NAPMW, NCRA,and/or other state mortgage trade associations do not make any misrepre-sentations or warranties concerning the regulatory and/or complianceaspects of advertisers, products or services and/or the editorial content con-tained in NMP Media Corp. publications. National Mortgage ProfessionalMagazine and NMP Media Corp. reserve the right to edit, reject and/or post-pone the publication of any articles, information or data.

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A new year … a new attitude and a new directionSo 2012 is finally here. Did you make a list of resolutions prior to midnight on Dec. 31,2011? Have you taken these resolutions to heart and actually stuck to them. Sure, weall vow to lose weight and eat better, but judging by the dwindling crowds at the gym,I can see that not many have been in the mood to stick to that one. What about yourbusiness? Have you made a commitment to improving your bottom line in 2012?

This month, we have assembled some of the industry’s top experts four our January2012 Special Focus on “Managing & Selling REOs.” In today’s marketplace, there’s agood chance you’re either dealing with a large inventory of REOs or trying liquidate

your REO portfolio. Perhaps that improvement on your bottom line can start with stepping into the REOmarketplace. Daren Blomquist of RealtyTrac kicks things off by sharing his expertise and providing the factsand figures as to why you should no longer neglect this niche in his piece, “Soaking Up REO Inventory Likea Sponge” on page 36. Following Daren, our resident leadership experts David Lykken and Jon Traver ofMortgage Banking Solutions tackle REOs in their piece on page 38. “REOs in 2012: The Key Word is ‘Trust’”examines just who out there can be relied upon for expert advice when entering the real estate-ownedmarketplace as a trustworthy and knowledgeable individual on the other side of the table can make orbreak a deal. On page 39, Ivan Choi of Matt Martin Real Estate Management takes a closer look at the hur-dles and obstacles in place when trying to close an REO transaction. Cheryl Lang of Integrated MortgageSolutions opens the debate on whether you should make the investment in fixing up an REO property orsell it in its current state in her aptly titled piece, “Rehab or Sell ‘As-Is?’” on page 40. Our section continueson page 42 as our FHA expert Jeff Mifsud of Mortgage Seminars LLC provides our readers with six pointsthat every loan originator should know before looking into purchasing a HUD REO property. Our specialfocus wraps up on page 43 with a submission from Frank Danna of Appraisal Logistics, effective ways ofopening the dam on your flooded REO pool.

NMP’s Professional of the MonthWe kick off January 2012 with a closer look at Brett McGovern of Bay Equity Home Loans on page 16, thesubject of our NMP Mortgage Professional of the Month. Brett took a leap of faith in 2007 as the mortgagemeltdown began to rear its ugly head. It was at that time that he decided to open Bay Equity and enter thewholesale marketplace and has enjoyed growing success ever since.

See you in D.C. this MarchBack to the subject of resolutions for the new year … did you make a pledge to become more involvedwith your industry? Do you want to stand alongside your peers as they take on the regulators who havebeen imposing their will on the industry? If you answered “yes,” a unique opportunity is on the horizon,March 19-20 in Washington, D.C. as you can join your peers in getting a firsthand look at the legislativeprocess on Capitol Hill at the 2012 NAMB Legislative & Regulatory Conference. NAMB is assembling a greatlist of speakers and guests, as attendees will be armed with the knowledge and talking points needed whenmeeting on Capitol Hill with your elected officials on Lobby Day. NAMB’s Legislative & RegulatoryConference is highlighted by the annual trip to Capitol Hill where you, as a constituent of your senators andrepresentatives, can provide your elected officials with the knowledge on legislation that may impact yourindustry. For more information, see NAMB President Donald J. Frommeyer’s message on page 12 or visitNAMB.org/legconference for more details on this event.

New year, new facesOur resolution here at National Mortgage Professional Magazine is to go above and beyond providing youwith the tips necessary to take your business to the next level from the industry’s top experts. This year, wewelcome a few new columns to the fold, starting with Casey Cunningham o XINNIX on page 4 and her newmonthly feature, “Pursuing Excellence.” Casey drives home the message of settling for nothing short of thebest in 2012, and how to take the steps necessary to attain your goals. Another new column for all you man-agers out there is Dave Hershman’s new entry, “For Managers Only” on page 18 where Dave shares his 30-plus years of industry experience in helping you find and train the right people to lead your team.

You get all this and much more in this month’s issue of National Mortgage Professional Magazine. Was12:00 a.m. on Jan. 1 just another tick of the clock for you? Or, did it mark the time to take action and standfirm to make the changes necessary, both personal and in business, that will set you toward your intend-ed goal not only in 2012 but beyond? Only you can make the choice to step off the sidelines and step intothe ring. If you are reading this publication, you are a survivor so far. Take what you’ve gone through andbuild upon your experiences while making an investment in yourself.

Until next month ...

Andrew T. Berman, Executive Vice PresidentNMP Media Corp.

National Mortgage Professional Magazineis published monthly by NMP Media Corp.

Copyright © 2012 NMP Media Corp.

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The Association of Mortgage Professionals

2701 West 15th Street, Suite 536 � Plano, TX 75075Phone #: (703) 342-5900 � Fax #: (530) 484-2906

Web site: www.namb.org

President—Donald J. Frommeyer, CRMSAmtrust Mortgage Funding Inc.200 Medical Drive, Suite DCarmel, IN 46032(317) 575-4355 � [email protected]

Vice President—Donald Fader, CRMSSMC Home FinanceP.O. Box 1376Kinston, NC 28503-1376(252) 523-5800 � [email protected]

Treasurer—John Councilman, CMC, CRMSAMC Mortgage Corporation2613 Fallston RoadFallston, MD 21047(410) 557-6400 � [email protected]

Secretary—Olga Kucerak, CRMSCrown Lending222 East Houston, Suite 1600San Antonio, TX 78205(210) 828-3384 � [email protected]

Past President—Jim Pair, CMCMortgage Associates Corpus Christi6262 Weber Road, Suite 208Corpus Christi, TX 78413(361) 853-9987 � [email protected]

Rocke Andrews, CMC, CRMSLending Arizona LLC1996 North KolbTucson, AZ 85715(520) 886-7283 � [email protected]

Fred Arnold, CMCAmerican Family Funding24961 The Old Road, Suite 101Stevenson Ranch, CA 91381(661) 284-1150 � [email protected]

Kay A. Cleland, CMC, CRMSKC Mortgage LLC200 South Wilcox Street #224Castle Rock, CO 80104(720) 810-4917 � [email protected]

Deb Killian, CRMSGMAC246 Federal Road, Unit C-24Brookfield, CT 06804(203) 778-9999, ext. 103 � [email protected]

Linda McCoyMortgage Team 1 Inc.6336 Picadilly Square DriveMobile, AL 36609(251) 610-0494 � [email protected]

Donald J. UngerPresident(303) 670-7993, ext. [email protected]

Daphne LargeVice President & Treasurer(901) [email protected]

Tom ConwellEx-Officio & Legislative Chair(800) 445-4922, ext. [email protected]

Nancy FedichDirector–Conference Chair(908) 813-8555, ext. [email protected]

Judy RyanDirector-New Membership & Elections Chair(800) 929-3400, ext. [email protected]

Susan CataldoDirector–Education & Compliance Chair(404) 303-8656, ext. [email protected]

William BowerDirector–Tenant ScreeningChair(800) [email protected]

Mike BrownDirector–Technology Chair(800) 925-6691, ext. [email protected]

Maureen DevineDirector–Education & Compliance Co-Chair(413) [email protected]

Renee EricksonDirector–Tenant Screening Co Chair(800) 311-1585, ext. [email protected]

Terry ClemansExecutive Director(630) [email protected]

Jan GerberOffice Manager/MembershipServices(630) [email protected]

PresidentLaurie Abshier, GML, CME, CMI(661) [email protected]

President-ElectCandace Smith, CME(512) [email protected]

Senior Vice PresidentJill Kinsman(206) [email protected]

Vice President-Northwestern RegionNita Cook, GML, CME, CMI(360) [email protected]

Vice President-Western RegionLyman King III, CME, CMI(916) [email protected]

Vice President-Central RegionLisa Puckett, CME(405) [email protected]

Vice President-Eastern RegionChristine Pollard(607) [email protected]

SecretaryKatheryn M. Farrell(509) [email protected]

TreasurerJeanne Evans, CME(918) [email protected]

ParliamentarianHulene Bridgman-Works(800) [email protected]

NAMB Board of Directors

National Association of ProfessionalMortgage Women

P.O. Box 451718 � Garland, TX 75042Phone #: (800) 827-3034 � Fax #: (469) 524-5121

Web site: www.napmw.org

OFFICERS

DIRECTORS2012 Board of Directors & Staff

National Credit Reporting Association Inc.125 East Lake Street, Suite 200 � Bloomingdale, IL 60108

Phone #: (630) 539-1525 � Fax #: (630) 539-1526Web site: www.ncrainc.org

National Board of Directors 2011-2012

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New Year’s Resolutionsby Mary Beth Doyle, Founder

There’s an old proverb that says, “Tomorrow belongs to the people who prepare for it today.” As we begin a new year, it’s important to focus on maximizing business through strategic, proactive marketing. But that’s easier said than done. Reaching out to all your clients, partners & prospects in an effective way takes valuable time & resources. Fortunately, LoyaltyExpress provides comprehensive, cost-effective solutions that motivate your book of business to take action. As a result, you can focus on closing loans.

LoyaltyExpress is the #1 choice of top-producing loan officers & executives across the nation. Here’s why:

Our proprietary technology enables you to automate high-impact communications that consistently deliver new & repeat business. Intelligent data mining identifies and promotes new opportunities and referrals.

Our wide selection of targeted programs delivers exceptional results. By combining high-quality direct mail, e-mail, and on-demand marketing solutions – your messages will successfully reach & engage your target audience through cross- media formats and channels.

Our solutions are easy to use. With only a few clicks of the mouse, you’ll be sending targeted marketing campaigns & pieces that convert your book of business into closed loan production. Our industry-leading client services team is always available to answer questions.

Time is of the essence. Take a few minutes to explore the benefits of working with LoyaltyExpress. It’s the best investment you can make in your business for 2012 and beyond.

LoyaltyExpress is the leading mortgage marketing company in the nation. For more information:

call 877.938.1175 or visit

www.loyaltyexpress.com.

By Casey Cunningham

I titled this piece “Pursuing Excellence” because I believe in it so pas-sionately. For you, for me, and for our industry. And I don’t think Iam alone in that belief. After all, what is the number one topic forbook sellers? Motivation, average to exceptional, 100 ways to excel-lence, the power within, the power without, the power to change,how to excel, how to succeed, how to whatever … you get it, every-

one is looking to achieve their best, and we in the mortgage business are no exception.Let’s face it; we’ve had a few challenges lately. The past 12 months (the past 36

months, actually) have been anything but pleasant. The days of quick approvals,sufficient values and paychecks with lots of lovely zeros have been replaced byDodd-Frank, appraisals that resemble some hybrid offspring of the Titanic andHindenburg, and loan conditions on a slam-dunk file that make Tolstoy’s War andPeace look like a sticky note reminding you to buy milk at the grocery store.

In short, the success we enjoyed and the excellence we achieved seems a littleout of reach these days … or is it?

The new world in which we live has resulted in a much-needed cleansing of theindustry, sending nefarious senior loan officers to throw in the towel and slither on totheir next opportunity. In the meantime, we’ve seen interest rates fall to levels notseen since dinosaurs roamed the Earth. With this in mind, I believe this is a year worthgetting excited about and where we can unabashedly pursue excellence to the fullest.That said, it is my opinion, we first need to jettison the idea that “three or four loansa month” is acceptable. Let’s be completely honest, despite contractual obligation toXYZ Mortgage Company Inc. stating three loans in monthly production keeps youemployed and allows you to still make a reasonable living, is that really the standardwe pursue? Why has the bar been set so low? The “standards” today are lower thanthey were 30 years ago. Let’s just call it what it is, shall we … excuses. We justify, delay,become lazy, blame the market, blame the economy, become complacent and settlefor mediocrity. With the current market conditions, there are countless loan officersstill very successful who don’t use the excuses to hamper their success.

Does it not speak to the essence of what plagued our industry for the past fouryears? Why do we, as humans, have a tendency to justify scraping our derrières aswe Fosbury Flop (look that one up) over this bar of mediocrity?

The setter of standards is not the boss’ boss’ boss who sits at a desk in an officebuilding nine states away. Cliché as it may be, the setter of standards is that lone-ly soul that stares back at you in the mirror. Not just in the mortgage game, butin life, your relationship with your spouse, your children, your personal finances,your health and the list goes on.

The age old questions remains: How many people truly pursue the excellencethat puts them on a road to success and goal achievement? The answer is … veryfew. But you can be counted in this elite group?

Ask yourself: What will it take? What will you commit to this year? Are you will-ing to abandon your comfort zone? What will you read to aid in your pursuit ofsuccess? How will you invest in yourself? Are you going to let your success be pred-icated on anyone else? Are you ready to succeed? When will you start? Find some-thing, ANYTHING to hold you accountable!

Professionally, partner with a co-worker, become a student of your profession,conduct site visits, find a top producer with whom you can extract ideas and emu-late their success, or best practices. Hire a business coach. Personally, hire a lifecoach, challenge your spouse, your kids, create a personal mission statement. Setgoals that motivate you. Find your purpose and establish a path to get you there.

The simple yet unavoidable question is not, what are you doing to pursue excel-lence, but will you pursue excellence? It’s there if you want it. Answer these twoquestions to begin your pursuit of excellence:

� What will you do today?� Who will you tell?

Casey Cunningham is president of XINNIX, a provider of mortgage sales and lead-ership development programs. She may be reached by phone at (678) 325-3501 ore-mail [email protected].

[NOTE: Develop “Pursuing Excellence”header artwork to be picked up monthly]

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For additional information regarding Conforming, Jumbo, FHA and VA Lending,Call us at 1-888-247-4207 or visit us online at www.iconwholesale.com

Icon Residential Lenders is one of the nation’s leading Conforming, Jumbo, FHA and VA

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customer service that exceeds our valued business partners’ expectations. With deep

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Bay Equity Home Loans Goes CompletelyPaperless

Bay Equity Home Loans hasannounced that it has completed itsinitiative to implement a completelypaperless loan processing system.While Bay Equity’s loan processing sys-tem has been predominantly paper-less for some time, the company’selectronic document management sys-tem now virtually eliminates printinghardcopies of loan documents. By nothaving to print hundreds of pages ofpaper—many of them legal-sized—oneach and every loan, Bay Equity helpsthe environment while realizing signif-icant financial savings. It also consid-erably reduces the time and man-hours necessary to take a real estateloan from application to funding.

“Loan documentation processing hasalways been an albatross to the realestate industry,” said Philip Mikolaj,director of information technology forBay Equity. “Each and every loanrequired hundreds of pages of paper.By implementing a fully electronic andpaperless system, we help the environ-ment and save money that goes right tothe bottom line. We can also bettermanage the entire process and mini-mize the time it takes to get a loanfunded and closed.”

The DataTrac EDM document man-agement software was developed byDel Mar DataTrac, a division of EllieMae. The software was tailored to BayEquity’s specific needs by Mikolaj,whose deployment takes full advantageof the system’s capabilities, including:� Up-front Submission Indexing: The

new system validates that the entireloan document package wasreceived and is ready to be submit-ted to loan underwriters.

� Appraisal Integration: Appraisals willautomatically appear in electronicdocument management for UWreview, with no human actionrequired to upload appraisals to thesystem.

� Remote Virtual Underwriting: Loanunderwriting can be done virtually,and from any operations center,allowing overflow managementamong operations centers.

� Document Coding: The electronic

document management system willdigitally generate comprehensiveloan closing packages inclusive ofbarcodes, which, when returned, will“auto-magically” scan and indexevery page to its respective andappropriate category.

� Pre-funding Auditing: Loan funderscan audit and run pre-funding bun-dles and checklists to ensure file iscomplete and ready for funding.(Post-closing audits can also be per-formed and reviewed to ensure thatall documentation is ready for deliv-ery to investors, who will acceptsecure electronic transfers directly.

StreetLinks AnnouncesUCDP-CompliantIntegration With ACI

ACI has announcedthat StreetLinks

Lender Solutions has integrated withACI’s eServices, an appraisal deliveryservice to help ensure compliance withclient/lender and investor require-ments. eServices combines appraisalcompliance and quality rules with elec-tronic delivery as a standard featureaccessible from the appraiser’s ACIdesktop software. ACI’s approach helpsensure that appraisal data complieswith both the Uniform AppraisalDataset (UAD) and MISMO XML require-ments before the appraiser completesthe appraisal report.

“ACI uses integration services fromits appraisal software to create cus-tomized delivery solutions. The newStreetLinks eService provides a connec-tion for us to seamlessly receive nativeXML directly from appraisers’ comput-ers with the assurance of our qualityand compliance standards,” said TonyEbeyer, chief strategy officer forStreetLinks. “The ACI system is intuitiveand allows for additional flexibility inprocessing and managing appraisalreports. That’s why thousands ofStreetLinks appraisers will rely on itevery month.”

Prior to delivering the appraisalreport to StreetLinks, the new eServiceperforms an in-depth quality controlreview using ACI’s PAR Logic reviewrules. The comprehensive library ofboth industry best practices and job-specific business rules checks theappraisal report for compliance withStreetLinks’ policies. Once the appraiserhas satisfied the requirements, the file

NMLS

National Education

National Training

National Networking

NAPMW is a community of nearly 2,000 professionals across the Country who engage in the mortgage / banking industry. Men and women from all backgrounds have joined NAPMW because they want to excel at what they do. Employers who want excel-lence from their employees engage with NAPMW for up-to-date education. Both professionals and employers have found there is a place for them in NAPMW.

To Join NAPMW visit:

www.napmw.org

or call: 1-800-827-3034

Have Questions? Please

feel free to e-mail us at:

[email protected]

Organized for the purpose of providing education to profession-als in all phases of the mortgage industry, NAPMW offers educa-tion via many venues – seminars and workshops held around the country, on-line, and at its National Education Conference held each May.

NAPMW membership gives you exclusive access to timely educa-tion regarding the regulations affecting your career such as a FREE TO MEMBERS monthly webinar on industry updates AND our 8 hour NMLS continuing education class offering (NMLS Provider # 1400309)

If you believe in helping to elevate the educational standards of this industry, or assisting in developing the most competent industry work force, then you believe in NAPMW.

NAPMW is not a women’s organization. But since women make up the majority of professionals in the mortgage/banking profes-sion, our purpose is to help them advance in business, personal, and leadership development.

Coast to Coast Associations

Discounted Services

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Education

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Why NAPMW?Three Simple Reasons

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pany introduce their customer-centric,quality focused way of doing business tohomebuyers and real estate profession-als throughout the region.

REMN’s new Dallas office is currentlystaffed by a team of 17 professionalsand will be overseen by Joe Greiner, theoffice’s area manager, the branch willoffer a wide variety of home lendingproducts, including conventional, FHAand VA loans, as well as REMN’s FHA203(k) Concierge Service, a unique ini-tiative that ensures the home improve-ment process of 203(k) mortgages runssmoothly for all of the involved parties.Greiner will report to REMN ExecutiveVice President Tim Bartosh.

“I’m very pleased with how quicklyREMN has grown throughout the area

and the reception we’ve received inDallas,” said Bartosh. “REMN’s historyof first-class customer service is well-0known in the mortgage industry andwith this new office, we’ll be able toshare this experience face-to-face withcurrent and future Dallas homebuyers.”

AllRegs and TotalLearning Solutions JoinForces on FHA Training

The Federal Hous-ing Administration(FHA) has awardedTotal Learning Solu-

tions (TLS) with a contract to providenationwide technical assistance train-

continued on page 10

is delivered to StreetLinks for furtherprocessing and eventually delivered toeither of the government-sponsoredenterprises (GSEs), Fannie Mae orFreddie Mac.

“As a result of this technology collab-oration with StreetLinks, we have devel-oped a comprehensive pre-deliveryUAD audit and XML delivery service thatmakes the process for the appraisersimple and efficient,” said GeorgeOpelka, SVP of ACI. “The upgrade pro-vides greater accuracy, which benefitsall parties—appraisers, managementcompanies, the GSEs and borrowers.”

Total Mortgage Services Now Licensed in West Virginia

Total Mortgage Services LLC hasannounced that it received its WestVirginia Mortgage Lender License fromthe West Virginia Division of Bankingand is able to originate residentialmortgage loans throughout the state ofWest Virginia. Total Mortgage islicensed as a mortgage lender in WestVirginia and holds Mortgage LenderLicense ML-30789.

“We believe we are entering the WestVirginia market at a very beneficialtime for borrowers, as mortgage ratesare close to historical lows and afford-able housing opportunities are avail-able throughout the state,” said JohnWalsh, president of Total Mortgage. “Weare excited to help responsible borrow-ers find the right mortgage solution intoday’s challenging environment fortheir purchase or refinancing needs.”

Total Mortgage is now licensed in 25states and the District of Columbia andhas three additional state licensespending.

REMN ContinuesWestward Expansion With New Colorado and Texas Branches

Real EstateM o r t g a g eN e t w o r kInc. (REMN)

has announced the opening of its firstDenver area location. As REMN’s firstbranch in the state of Colorado, thisnew location will help the companybetter service the needs of the region’syear round residents, vacation homebuyers and real estate professionals.

Located in Englewood, Colo., thenew office will be overseen by therecently hired Cathy Stroud, who joinsREMN as their first regional vice presi-dent for the area. A Denver residentand mortgage industry professional formore than 20 years, Stroud is a gradu-ate of Colorado State University, anactive board member of the ColoradoMortgage Lenders Association (CMLA)and volunteers with Susan B. Komen forthe Cure.

Stroud is joined by Vickie Newmanand Kevin Feakes as mortgage loanoriginators, bringing with a combined

50 years of experience to REMN. ScottNewman joins REMN as the Denveroffice’s area manager and will overseeday-to-day operations.

“REMN is well-known in the industryfor their terrific customer service andcommitment to finding the best possi-ble mortgage solutions for homeown-ers, a reputation that will follow themhere in Denver’s growing and diversemarket,” said Stroud. “We’ve recruitedsome true local all-stars for this officeand I look forward to sharing the REMNway of doing business with the greaterDenver community.”

REMN has also announced the open-ing of its first Dallas retail location. AsREMN’s first branch in the state ofTexas, this new office will help the com-

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ControllingCredit Risk

By Jonathan Foxx

We begin 2012with the cer-tain knowl-

edge that many newregulations and respon-sibilities have made sig-

nificant and costly demands on lenders,servicers, mortgage brokers, banks,investors, and mortgage securitizers torevise and strengthen plans to assure theireconomic survival. Many compliancedepartments throughout the country haveset forth robust compliance calendars inorder to monitor, test for, and implementfederal and state guidelines.

The primary source of revenue for theaforementioned companies (collectively,financial institutions) is the negotiating,extending, administering, and packagingof credit. Extension of credit and creditrisk are really inseparable features ofmortgage loan originations—one doesnot exist without the other.

Credit risk is quite measurable, espe-cially with respect to any activity thatposes a risk to earnings and capital. It isno secret that inadequate risk manage-ment is a leading cause of the failure offinancial institutions. Just as credit riskand extension of credit are inseparable,so also are they inseparable from riskmanagement. Only to the extent that

credit risk and appropriate risk man-agement procedures are identified,analyzed, established, and implement-ed may financial institutions claim tohave safe and sound lending practices.

Risk management (often referred to,generically, as Compliance) should notformally come under the rubric of the so-called “Best Practices” section of corpo-rate governance. In my view, risk man-agement is not an elective, a negotiableissue, a good operating practice, a meretechnique consistently providing superiorresults, a Six Sigma template, or a busi-ness management strategy. Rather, riskmanagement is, and ought to be, aninherent and essential, evaluative andministerial function reaching to virtuallyall intrinsic aspects of a financial institu-

tion’s business model. This is whyI coined the term

“Mortgage RiskManagement,”

because it stands on its own, a specializa-tion that provides a firm foundation tothe residential mortgage loan flowprocess—from point of sale to securitiza-tion. Put otherwise, it is the one and only“fail-safe” means by which a board ofdirectors may ensure that managementeffectively implements internal processesdesigned to identify, measure, monitor,and control credit risk.

Close consideration of appropriaterisk management practices is vital to afinancial institution’s stability, mostespecially in the outset of a new yearand at all other times. But what is riskmanagement? And, how does risk man-agement affect a financial institution’sway of doing business?

In this article, I will provide a briefoutline of two key areas where creditrisk review and risk management con-join directly to impact a financial insti-tution’s capability to conduct businessand manage a thicket of regulations.Drawing on my own experience in work-ing with our clients, I will offer anoverview of what risk managemententails, whether conducted internally orthrough external resources.

To get a sense of a typical approachinvolved in evaluating credit risk andthe concurrent role played by risk man-agement, I will outline the followingareas: Quantity of Risk and Quality ofRisk Management.

In a penultimate section, entitledImplementing Risk Management, I willoffer some guidance about how to usecredit risk information effectively to for-tify a financial institution.

Quantity of RiskI define quantity of risk as the level ofcredit risk associated with the credit port-folio of a financial institution. Generally,there are three levels for quantity of risk:Low, moderate or high. In evaluatingcredit risk, there are nine areas of reviewthat should be undertaken.

1) Risk Level� Consider in the analysis the size of

the exposure associated with each of


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heard on the street continued from page 7

ing to its business and industry part-ners. AllRegs Inc. is the exclusivemortgage industry partner of the TLSteam. TLS and AllRegs (referred to asTeam TLS) will be responsible for pro-viding professional, technical andadministrative services to delivertechnical-assistance training nation-wide via FHA, in conjunction with theOffice of Fair Housing and EqualOpportunity (FHEO) and the Office ofthe Inspector General (OIG), to itsbusiness and industry partners. Thepurpose of this training is to addressthe housing crisis by ensuring educa-tion on, and compliance with, FHAprogram guidelines.

The delivery of this comprehen-sive training curriculum will supportthe implementation of policies andprogram changes to FHA programsas a result of legislation and otherissues.

“We are excited to be a part of TeamTLS and for AllRegs to help deliver thisimportant FHA training initiative to themortgage lending industry,” said DanThoms, EVP of AllRegs.

Equator Reports Nearly 1.2 Million Short Sales Initiated

Equator (EQ),a provider ofdefault serv-icing technol-

ogy, has announced in its fourthquarter report that approximately1.2 million short sales have been ini-tiated since the launch of its shortsale module in November of 2009.The report also states that Equator’sLoan Segmentation Module has deci-sioned more than 875,000 loanssince early 2011 and in excess of$150 billion in assets have been soldthrough its platform since 2003.

“Equator now offers servicers acomplete, end-to-end default solu-tion,” said Equator Chief ExecutiveOfficer Chris Saitta. “Our platformcan handle every aspect of defaultthat our clients need, from loan seg-mentation to loan modification,short sales, deeds in lieu, invoicing,foreclosure processing and REO.”

Equator recently announced plansto launch a new comprehensive soft-ware solution for Real EstateProfessionals called REvolution Basicin early 2012, an enterprise levelsolution for real estate professionalswhich will allow them to handle bothdistressed and traditional propertiesseamlessly through one system.

“Equator’s loan segmentationmodule has been a huge success withproven results,” said Equator COOJohn Vella. “The enormous volumethat has run through the model hasallowed Equator to validate its valueand we anticipate that the volume in2012 will at least double.”

Avista SolutionsAnnounces PartnershipWith ComplianceEase

Avista Solutionshas announcedthe completionof a direct inte-

gration to ComplianceAnalyzer, anautomated compliance auditing solu-tion from risk management solutionprovider ComplianceEase. AvistaSolutions and ComplianceEase have anumber of mutual customers and thisintegration allows those customers toaccess the ComplianceAnalyzer solutiondirectly from their Avista Agile LOS.

ComplianceAnalyzer provides real-time compliance audits at any point inthe lending process, safeguarding themfrom potential loan risks. As part ofrecent electronic examination (e-Exam)initiatives, state regulators have beenusing ComplianceAnalyzer and other e-Exam tools to audit as much as 100 per-cent of licensees’ loans in regulatoryexaminations. By leveraging integratedaudits using the same auditing soft-ware, lenders can prepare in advancefor their e-Exams.

ComplianceAnalyzer covers a fullspectrum of government regulations,including the Home Ownership andEquity Protection Act (HOEPA), theTruth-in-Lending Act (TILA), Real EstateSettlement Procedures Act (RESPA),state and local anti-predatory lendinglaws, state license-based consumerlending regulations and secondary mar-ket investor and government-sponsoredenterprise (GSE) compliance guidelines.

“Avista Solutions recognizes the impor-tance of providing our customers withaccess to industry leading compliancetools,” said Avista Solutions ChiefOperating Officer & Chief Financial OfficerJerry White. “As the company behindrobust tools that state banking and mort-gage regulators rely on, ComplianceEase isa significant force in the mortgage indus-try and we are excited to now offer aseamless, system-to-system interface totheir ComplianceAnalyzer solution.”

Avista customers who choose tosign up for ComplianceAnalyzer mayutilize the tool to pinpoint a mortgageloan’s compliance risk factors,whether the loan is in the pre-close orpost-close stage, with a single clickand without leaving their Avista AgileLOS. ComplianceAnalyzer returns com-prehensive, user-friendly audit reportsto lenders within seconds. Each reportfeatures the industry standardRiskIndicator, a score that reflects aloan’s compliance risk, as well asquantitative analysis of thresholdsand detailed qualitative overviewswith narrative descriptions of regula-tory requirements.

“Avista users can enjoy the best ofboth worlds with this seamless integra-tion, continuing to use their LOS ofchoice, while managing compliance

By David Rasmussen

Automating the acceptance of appraisal and other val-uation services has been an objective of lenders for along time. While it has been possible to convert apprais-al data into an electronic format for transmission andstorage, the lack of consistency among providers hassignificantly limited the ability to do anything more.

When Fannie Mae and Freddie Mac implemented theUniform Mortgage Data Program (UMDP), along with its three main ini-tiatives, the Uniform Loan Delivery Dataset (ULDD), Uniform AppraisalDataset (UAD) and Uniform Collateral Data Portal (UCDP), its purpose wasto keep data provided to the mortgage industry consistent. Now, we areseeing this positive step in uniformity take on a multitude of new formsand break down barriers to data access.

From a broad perspective, valuation management platforms can allowan organization to effectively extend itself in a unified manner, typicallyconnecting lending branches, or perhaps, linking the origination arm tothe servicing arm. However, in today’s climate, lenders can leveragethese solutions to extend from internal originations efforts into the sec-ondary market government-sponsored enterprise (GSE) investor initia-tives to create more cohesion than ever before.

A robust valuation management platform, combined with the newuniformity of appraisal data, also greatly improves an organization’s abil-ity to convert data to information that can be used to identify new prod-ucts, services and opportunities. The industry is already seeing UAD def-initions and terms being embraced in the production of non-traditionalvaluation products, making it possible for an organization to gatherinput from various sources in a common language to facilitate betteranalysis and understanding of the underlying collateral throughout thelife of the loan.

Looking at a more detailed level within the platform itself, there areat least three functional benefits of integrating UCDP and UAD modulesand embracing the concept of data uniformity.

� Benefit #1: Advanced valuation management platforms can pro-vide the ability to convert first-generation appraisals into an elec-tronic data format compliant with GSE initiatives. When that for-mat is not readily available from an appraiser or an appraisalmanagement company (AMC), or a lender chooses not to utilize theportal-level conversion tool, lenders need to have the ability toconvert it for submission. Valuation platforms can provide thisfacility without ever leaving the native application for appraisalorder, receipt and review.

� Benefit #2: Advanced valuation management platforms can pro-vide the ability to automate expectations and resolve issuesbefore submission. Specifically, when an appraisal is returned, avaluation management platform can confirm if the data is UAD

SPONSORED EDITORIAL


In Uniformity Liesthe Path to Progress


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with ComplianceAnalyzer,” saidComplianceEase Senior Vice PresidentJason Roth. “Major secondary marketinvestors use ComplianceAnalyzer tocheck every loan prior to purchase andstate regulatory examiners are using itto audit as much as 100 percent oflicensees’ portfolios. To safeguard theirreputations and reduce financial risks,it makes a lot of sense for lenders to dothe same.”

radius SelectsMortgageFlex’sLoanQuest for Cloud-Based LOS Needs

radius financial groupinc. has announcedthat is has selectedLoanQuest from Mort-

gageFlex Systems for their loan origi-nation software (LOS) needs. Theirdecision was based on the desire tohave an adaptable, modern platformwithout the back-end hardwarecosts. The hosted LoanQuest systemselected includes the enterprise-levelLOS and a Web consumer portal thatallows consumers immediate accessto loan status.

“Our business needs required asystem that is flexible enough to con-form to our origination workflowrequirements, not the other wayaround,” said Keith Polaski, princi-pal at radius. “LoanQuest provedthat it was versatile and could beadapted as needed without signifi-cant programming resources.”

MortgageFlex offers several host-ing options, including transactionaland SaaS. The transactional optionallows lenders to “pay-as-used” on aper loan basis and is very beneficialfor lending organizations that do nothave technical infrastructure andsupport readily available. Hostedoptions also give lenders high levelsof security with SSAE16-certifiedfacilities and full Disaster Recoverysites.

“We understand radius’ businessrequirements and are confident wewill meet and exceed their needs,”said Craig Bechtle, chief operatingofficer of MortgageFlex. “We’re look-ing forward to a long and beneficialpartnership.”

DocuTech Acquires LSSI Software Assets From Emphasys

DocuTech Corporation has announcedthe acquisition of the assets of LenderSupport Systems Inc.’s (LSSI) Docs3Dmortgage document software from par-ent company, Emphasys Software. Theacquisition of LSSI’s Docs3D softwareand customer base enables DocuTechto continue growing its existing pres-ence among regional banks and cred-it unions. Current LSSI customers willsee no disruption of services and canlook forward to benefiting from theexpanded compliance services offered

by DocuTech, including dedicatedlegal staff tracking all regulatorychanges and monthly updates toensure all systems are up-to-date.

“We are thoroughly excited tobegin offering our proven compli-ance and easy-to-use document anddisclosure services to LSSI users,” saidTy Jenkins, chief executive officer ofDocuTech. “We welcome Docs3D cus-tomers to the DocuTech family andlook forward to bringing our indus-try-standard levels of compliance,service and innovative documenttechnology to them.”

DocuTech will provide full support toall of LSSI’s customers. This includescustomer support call centers, educa-tional materials on regulatory issues

and legal staff to track and implementnew regulations.

Mortgage InformationServices AnnouncesIntegration With UCDP

M o r t g a g eInformat ionServices Inc.

(MIS) has announced that it has inte-grated with the Uniform Collateral DataPortal (UCDP) and is compliant with theUniform Appraisal Dataset (UAD).

Clients of MIS working with thegovernment-sponsored enterprises(GSEs) will continue to be able toplace their orders through MIS’s pro-prietary Web-based order placementand tracking platform. They will not

need to take the additional step ofuploading the appraisal reportthemselves to the UCDP as MIS hasthe ability to deliver it to both theclient and the GSEs. In the currentenvironment, MIS prides itself onproviding services that streamlinethe valuation, title and closingprocesses, allowing their clients tofocus on growing and maintainingtheir businesses.

MIS has been a national providerof real estate information to the res-idential mortgage market since 1990,offering title insurance, closing andvaluation services to loan originatorsand servicing companies.

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So here we are,looking at anew year and

wondering about all ofthe good things that wecan start over, so wedo not make thesame mistakes that

we made last year. So I found some-thing that we want to change rightaway at NAMB, the Association ofMortgage Professionals? Membership!It has come to my attention from a fewloan originators out there that theypaid their state for an NAMBMembership, but they are not able toget onto the Web site, get the discount-ed rate at an NAMB event as a member,renew their certification, nor get theirLending Integrity Seal of Approval.

I need all of you to make sure andverify that your NAMB Membership isactive. Go on and make sure that youare listed in the “Find an NAMBBroker” search feature. If you arenot, either you membership hasexpired and you did not renew, or ifyou paid your dues to your state,contact your state’s treasurer and/orexecutive director and have themcheck out the problem. If your mem-bership has expired, now is the timeto RENEW! And because the DelegateCouncil changed the by-laws of theassociation, you can renew youNAMB dues online by going online toJoinNAMB.com and you can renewyou membership. The best thing thatyou can do is ask your friends if theyare members of NAMB. If they ask“Why” reply to them, “Why not?”

I have also been speaking withoriginators nationwide about ourLending Integrity Seal of Approval. Doyou currently have yours? This is agreat point to make to your cus-tomers that you have this Seal. Youcan go online to NAMB.org and clickon the “Membership” icon and under-neath the heading, you will find infor-mation on the Lending Integrity Seal ofApproval where you can apply for theSeal. There is no reason that you shouldwant to advertise yourself without theLending Integrity Seal.

To change direction, we are current-ly approaching the time that all NAMBmembers need to start to make plans to

join us in Washington, D.C. for the2012 NAMB Legislative & RegulatoryConference, set for Monday-Tuesday,March 19-20 at the Capitol SkylineHotel in Washington, D.C. Please visitNAMB.org and click on the 2012Legislative Conference logo to seewhat is in store for this year’s speakersand panels. This year is going to bereally important and all membersneed to come, attend the LegislativeProgram on Monday, March 19 andvisit your elected officials to let themknow what NAMB and its membersare doing. There is nothing like beinga constituent and walking into theiroffice as a voter. They are there to lis-ten to you and get information fromyou. Remember, this is for NAMBmembers only, so you are on the Hillrepresenting your national associa-tion, state association and yourself.Come to the Conference, get yourinformation and go talk to your repre-sentative on the nation’s capital.

If you have never been toWashington, D.C., now is the time tomake your mark and get a firsthandlook at our nation’s legislative process.We will be hosting classes on keypoints to discuss with your congress-men and senators, and what you needto do on each and every visit withthem. If your state is organizing yourCapitol Hill visits, which most stateassociations do to make sure that themeetings are coordinated, you need tocontact your state leadership and letthem know that you will be attending.They will welcome you with openarms, and get you set up to walk withthem through the halls of Congress.

I can remember the first time Iwent to Washington, D.C. back in1999. It not only was an honor to beable to walk in as a member of NAMBand my great state of Indiana, but Ialso got to meet those people thatreally only existed on the TV. You seethem on political talk shows and youwonder what they are like in person,and I had the opportunity to meetmost of them personally. During thetime that we were in their office, theylistened to what we were saying, and Ihad the chance to engage in conversa-tion with them. It was really exciting.So, get on the bandwagon and get to

the 2012 Legislative & RegulatoryConference where you will get somegreat information, learn a great dealabout government, and you will learnhow you can keep in touch with yourelected officials and follow up in yourhome state if we ever need you tocontact them during our grassrootsevents.

The NAMB board of directors hasgone through a few changes sinceNAMB/WEST. Walt Scott has resignedfrom the board due to not being able tospend a lot of free time performing hisboard duties. Walt lost his father abouta year-and-a-half ago and is now thecaregiver to his mother, and thisaccounts for a lot of his time. I will missWalt and I wish him well. And let’s hopeVillanova has a pretty good basketballteam this year!

We have added two new people tothe board. First Rocke Andrews, CMC,CRMS from Arizona, NAMB’s EducationCommittee Chair, was appointed to theboard in November. Rocke has had a lotof experience working on several NAMBand state committees, and will bring adifferent perspective to the board. Alsoat NAMB/WEST, we added Kay Cleland,CMC, CRMS from Colorado to our ranks.Kay is a past president of the ColoradoAssociation of Mortgage Professionals(CoAMP) and is CoAMP’s currentMembership Committee Chair. As mostof you who know Kay, she brings a vital-ity of life to every meeting, and she willbe heading up the new MembershipCommittee and NAMB’s membershipcampaign.

As I think most of you know, sincewe got back from NAMB/WEST, MikeAnderson, our vice president andGovernment Affairs CommitteeChairman, has had to resign his posi-tion with NAMB due to his mortgagecompany expansion and the increasein time he needs to spend training hisstaff for this expansion. Over the pasttwo years, Mike and I have had a rela-tionship where we spoke every dayand passed ideas back and forthabout NAMB. When I took over asNAMB president in November, weactually started talking more as I wasbeginning my presidency and sharingideas with Mike so that when hewould take over, he would be pre-

pared to do the things that I am cur-rently doing on a daily basis. I amgoing to miss Mike here at NAMB, butI do know that our friendship willcontinue long past our involvementwith NAMB. I wish him the best, and Iknow that he is only a phone callaway to brighten my day or to ask hisadvice. One promise that Mike didmake to me is that he may be goingaway from the day to day trials andtribulations, but he will be attendingall of NAMB’s events. Mike, I will seeyou in D.C.

We have promoted John Hudson fromTexas as NAMB’s new Government AffairsCommittee Chair. John was serving asvice chair of the Government AffairsCommittee, and Mike was already get-ting him ready to take over next June, sohe is ready. John is jumping in with bothfeet and he should be already having hismonthly Government Affairs meetingsby the time this issue is published. Makesure you stop by and introduce yourselfto John when in D.C.

In conclusion, I really appreciatethe support and kind e-mails that Ihave received from all of you since Itook over this position. I do spend alot of my own free time working onthings that need to be addressed.Your board of directors is also work-ing very hard and none of us arereceiving any money for what we do.This is truly an all-volunteer associa-tion, and I am proud of each andevery one of our board members. Iappreciate the e-mails [email protected], so keep themcoming with your ideas and sugges-tions. So far, I have been able toanswer each message personally. Ifyou want to become actively involvedwith NAMB, let me know. It will soonbe time for nominations for the boardand we need people, but I will writemore on that in a future message.

So renew your membership now, orif not a member, now is the time tojoin, and remember … Why not?

Sincerely,

Donald J. Frommeyer, CRMS,PresidentNAMB, The Association of MortgageProfessionals

The President’s Corner: January 2011

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controlling credit risk continued from page 8

the areas bulleted below, their riskprofiles, credit quality indicators,amounts, volatility, and trends:� Delinquencies� Criticized and classified loans� Non-accrual or non-performing

loans� Losses� Other credit quality metrics used

by the financial institution (i.e.,weighted average: risk grade ordefault probability)

� Underwriting standards� Exceptions to policy

2) Risk Implications� There are two areas in particular that

are determinative with respect torisk implications:� Significant growth in the size of a

credit risk exposure, includingwhether such growth might bemasking deterioration in creditquality indicators; and

� Material changes in policies, pro-cedures, or underwriting stan-dards.

3) Risk Assessments� Prepare, review, and discuss with

management any internally pre-pared risk assessments of credit risk(i.e., borrower profiles, disclosures,procedures, compliance with regula-tory mandates).

4) Economic Environment� Review the local, regional, and

national economic trends and out-look, and assess their impact on thecredit risk.

5) Business Plans� Review business and strategic plans,

and evaluate how their implementa-tion may affect the level of risk posedby any credit risk.

6) Earnings and Capital� Review and discuss with manage-

ment the results from applicabletesting of product evaluations withrespect to potential impact on earn-ings, investment and raising or main-taining capital.

7) Mitigation Strategies� Evaluate the impact of mitigation

strategies on the quantity of risk inall areas of the loan flow process.Consider the objectives of programs,and evaluate all departments’ expe-rience with these risk levels, includ-ing management’s experience inaddressing problems that may arise,or have previously arisen, in suchrisk levels.

8) Asset Classes� Determine and give in-depth

attention to asset classes and loanproducts with more volatility inperformance.

9) Capital� Based on the above-listed reviews

and findings, assess whether thefinancial institution has adequatecapital to support the risk posed bythe quantity of risk.

Quality of RiskManagementHaving worked with clients on their riskmanagement needs over the years, Ihave often felt that quality of risk man-agement is where the most work isneeded. Financial institutions usuallycan compile most, if not all, of thequantity of risk information. But thenwhat?

I define quality of risk management,broadly, as the exercise of producingevaluative findings with respect to theareas of Policy, Processes, Proceduresand Personnel for the purpose of iden-tifying, measuring and appropriatelymitigating credit risk.

Generally, there are three levels forquality of risk management: Strong,Satisfactory, or Weak.

PolicyDetermine whether the managementhas adopted effective policies that areconsistent with safe and sound prac-tices, given the financial institution’ssize, nature, complexity, and risk pro-file.

Evaluate the following areas todetermine whether relevant policiesprovide appropriate guidance for iden-tifying and managing the financialinstitution’s credit risk.

� Consider whether the financial insti-tution:� Establishes a tolerance for risk,

which would be shown, forinstance, as a percentage of capi-tal or expressed in terms of risk,but not simply by the financialinstitution’s size (i.e., toleranceshould be expressed as risk ofdollar loss, risk to earnings, orrisk to capital).

� Develops a company-wide frame-work for identifying credit riskacross business lines, and origi-nation channels, including con-sideration of distinct groups ofloans whose credit performancemay be correlated.

� Establishes a process for testingthe identification of potentialcredit risk, and to use such test-ing to evaluate the potentialimpact of adverse scenarios forcredit risk on capital and liquidi-ty, and for reporting those resultsto senior management and/orthe board of directors.

� Clarifies the roles and responsi-bilities associated with identify-ing and managing credit risk,particularly those that may crossbusiness lines or otherwise not

be under common management.� Defines the process for setting

credit risk limits and for approv-ing changes and exceptionsthereto.

� Determine whether credit risklimits are well defined and rea-sonable. Consider the way thatlimits are measured and the useof limits or parameters for differ-ent types of exposure within acredit risk class (i.e., propertytypes, product types, geographi-cal considerations, and so forth).

� Verify that management period-ically reviews and approves thefinancial institution’s credit riskpolicies, including relevant lim-its or strategies on significantcredit risk.

ProcessesDetermine whether the financial insti-tution has processes in place to provideaccurate and timely assessments ofcredit risk associated with its activitiesinvolving the extension of credit. Thereare two areas that we look for in deter-mining quality of risk managementprocesses:

1. We evaluate how policies, proce-dures, and plans affecting credit riskare communicated. This analysisinvolves considering whether man-agement has clearly communicatedobjectives and credit risk parametersto the board of directors and affect-ed staff. And this review alsoincludes a determination of whetherthe board has approved the existingcredit risk limits.

2. In light of the scope and complexityof a financial institution, we evalu-ate the adequacy of its processes foranalyzing credit risk by consideringthe following questions:� Does the financial institution

assess the level of risk associatedwith each credit risk?

� Does the financial institution’srisk assessment aggregate expo-sures on a company-wide basisand across lines of business?

� Are the results of the risk assess-ments, including those from test-ing, appropriately incorporatedinto the overall capital planningprocess?

� Do the conclusions concerningcredit risk appear reasonable inlight of information availablefrom other sources?

� Is the capital level adequate tosupport the levels and types ofcredit risk exposures?

� Is a formal analysis of higher cred-it risk conducted periodically, anddoes the financial institution havean effective system for monitoringdevelopments in the interim?

� Are the financial institution’sanalyses adequately document-ed and the credit risk conclu-sions communicated in a waythat provides decision makerswith a reasonable basis forstrategic development?

� Are the resources devoted to theanalysis of credit risk, includingthe number and expertise of staffmembers, considered adequate?

ProceduresIn reviewing procedures, we determinewhether the financial institution hassystems and guidelines in place to pro-vide accurate and timely assessmentsand feedback of credit risk associatedwith its credit extension activities.

There are four areas that we look atin determining quality of risk manage-ment procedures:

1. Determine whether managementinformation systems (MIS) providetimely, accurate, and useful infor-mation to evaluate risk levels andtrends in credit risk by consideringthe following questions:� Are all material credit risk expo-

sures captured across all lines ofbusiness?

� Does the entirety of the data ele-ments collected in the review ofprocedures appear to be ade-quate, given the scope and com-plexity of the portfolio?

� To whom are MIS and all reportsinvolved in the loan flow processdistributed and how timely arethese reports?

2. Analyze how complying with creditrisk parameters is monitored andreported to senior management andthe board of directors.

3. Assess the level of review for creditrisks that are nearing their credit risklimits. For instance, is there suffi-cient reporting to senior manage-ment and is oversight heightened?

4. Evaluate the adequacy of the proce-dures for monitoring current condi-tions in higher credit risks, andassess the reliability and accuracy ofthe types of internal and externalresources used.

PersonnelStaffing is a pivotal area for the qualityof risk management, because it revealsthe overall ability of the financial insti-tution to meet the demands andresponsibilities relating to administer-ing the loan flow process. In effect, thelevel assigned to this quality of riskmanagement indicates management’sability to supervise its credit risk in asafe and sound manner.

There are four areas that we look atin determining quality of risk manage-ment personnel:

1. Given the scope and complexity ofthe financial institution’s portfolio,assess the appropriateness of thecredit risk management structureand the experience of designatedpersonnel, by evaluating:� Whether the expertise, training,

and number of staff membersassigned to manage credit riskissues are adequate.

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� Whether reporting lines encour-age open communication andlimit the chances of conflicts ofinterest.

� Whether there is an unusuallevel of staff turnover and theeffect of any staff turnover oncredit risk management.

2. Determine whether managementhas ascertained the adequacy ofwritten policies for managing creditrisk and assess management’sknowledge thereof.

3. Ascertain the adequacy of manage-ment’s practices and capabilities formanaging credit risk, including timelyresponses to a changing environment.

4. Assess the performance of manage-ment and the compensation pro-grams for staff members managingcredit risks. Consider whether theseprograms measure and rewardbehavior that supports the financialinstitution’s strategic objectives andrisk tolerance limits. (If the financialinstitution offers incentive compen-sation programs, ensure that (1) theyprovide employees with incentivesthat appropriately balance risk andreward, (2) are compatible witheffective controls and risk manage-ment, and (3) at all times are sup-ported by strong corporate gover-nance, including active and effectiveoversight by the financial institu-tion’s board of directors.)

Implementing RiskManagementNow that we have given considerationto certain features of Quantity of Riskand Quality of Risk Management, let’soutline what is required to implementrisk management in a practical andeffective way.

If the methodologies outlined abovehave been completed, we have reachedthe point where we may determine,perhaps on a preliminary basis, certainoverall conclusions, and communicateour findings regarding quantity of riskand quality of risk management.

Keeping in mind that risk manage-ment, as previously stated, involves theability to identify, measure, monitor,and control credit risk, there are sever-al areas of guidance that we usually dis-cuss with or provide to management aspart of a due diligence review.

1) MemorandumWe provide a summary that elucidatesthe quantity of risk and quality of riskmanagement, thereby clarifying thedirection of credit risk and the adequa-cy of the financial institution’s processfor managing credit risk.

A typical summary includes: � Quality of the financial institution’s

process for managing credit risk,including the adequacy of policiesand procedures.

� Asset quality of credit risk.� Appropriateness of strategic and

business plans in light of their

impact on credit risks.� Responsiveness of strategic and busi-

ness plans to test results that identifycredit risks and materially affect riskexposure due to adverse economicscenarios.

� Accuracy and timeliness of manage-ment information systems and theentirety of data captured relative tothe scope and complexity of the loanportfolio.

� Quality of staffing, and manage-ment’s capability to manage creditrisk.

� Recommendation of correctiveactions for deficient policies, proce-dures, practices, or other concerns,which include:� Adequacy of adherence to poli-

cies and credit parameters.� Adequacy of loan review or audit

functions.� Other matters of significance.

2) ImpactFor any issues of concern identifiedwhen performing the credit risk proce-dures, we determine and discuss theirimpact on the financial institution’saggregate credit risk and its direction.

3) Corrective ActionWe encourage a discussion regardingprevious, regulatory examination find-ings and conclusions, including a list ofthose credit risks that posed a challengeto management or presented unusualand significant credit risk to the finan-cial institution. If needed, we provide aCorrective Action Matrix, which is aform that tracks all recommendedchanges and monitors compliance withthose changes.

� Corrective Action Matrix. We issuethe Corrective Action Matrix mostoften when conditions indicate (1)there has been a deviation fromsound, fundamental principles thatis likely to result in financial deterio-ration or increased risk if notaddressed, and (2) there is substan-tive noncompliance with laws or reg-ulations.

� When a Corrective Action Matrix isnot used, the following featuresshould still pertain:� Describe the defect.� Identify contributing factors or

the root cause(s) of the defect.� Describe likely consequences or

effects from inaction.� State the record management

commitment to corrective action.� Include the time frame and the

person(s) responsible for correc-tive action.

4) DiscussionWe set aside time to carefully review theactions that management and all rele-vant staff will take in the future to effec-tively supervise credit risk. In this set-ting, we discuss various findings withmanagement, suggesting ways to fur-


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Each month, National MortgageProfessional Magazine will focuson one of the industry’s top players

in our “Mortgage Professional of theMonth” feature. Our readers are encour-aged to contact us by e-mail at [email protected] to be consid-ered for a future “Mortgage Professionalof the Month” feature article.

This month, we had a chance to chatwith Brett McGovern, founder, presidentand board member of Bay Equity LLC,and president of Bay Equity HomeLoans. Brett has more than 17 years ofexperience in real estate sales and lend-ing. Prior to founding Bay Equity, he wasa senior vice president of Grubb & EllisCompany in San Francisco. He is respon-sible for key corporate functions, includ-ing investor and warehouse line rela-tions, oversight of accounting and sec-ondary functions, marketing and corpo-rate communications.

How did you first get started in themortgage business?I started as senior vice president ofGrubb & Ellis Company in SanFrancisco, leasing and selling officebuildings in the commercial real estatemarketplace. My brothers and a num-ber of my friends were working as salesexecutives at Washington Mutual(WAMU) and were doing pretty well. In2004, I decided to join WAMU and orig-inate loans and did well with WAMU.

When things began to deteriorate inthe marketplace around March of 2007,I called a mentor of mine, Jim Corbett.Jim founded the non-profit SacramentoEntrepreneurship Academy, a programfor students of Sacramento StateUniversity and UC Davis. It’s a year-longprogram every Saturday from 8:00a.m.-1:00 p.m. where you form a teamand develop a business plan over thecourse of the year. In addition, eachSaturday successful businesspeoplefrom the area come and talk to youabout accounting and law, and a vari-ety of subjects that can help you craftyour business plan. I went through theAcademy in 1995 when I was a senior atUC Davis. There, I got the framework onwhat it takes to start a company.Students who go through the programall go through their own gestation peri-od. It doesn’t mean you are going tostart a company when you complete it,but you know what to do when you are

ready to take that leap.In 2007, I saw an opportunity with

the landscape of the mortgage industrychanging, so I decided to start BayEquity. I called Jim and pitched him theidea of Bay Equity and he agreed toserve as the firm’s chairman. Jim is along-time entrepreneur and successfulreal estate investor, who has served aschairman of Bay Equity since its incep-tion. We developed the business planfor Bay Equity, and my brothers,Managing Directors Jon and CaseyMcGovern, joined shortly thereafter.

We raised $1,750,000 in startup cap-ital just for balance sheet purposes, andformed Bay Equity in June of 2007. Thecredit crisis started the next month,causing us to revise our original busi-ness plan and delaying our ability toactually get in business. Warehouselines were in a defensive mode and notproviding liquidity to start up ventures.I ended up calling around 100 commu-nity banks to try and get a line of creditthat we would use like a warehouse lineand finally found one, Bridge Bank inSan Jose who agreed to give us a line ofcredit. We showed them how it couldfunction as a warehouse line with thehelp of some operations expertise thatwas involved early in the company’sdevelopment.

We now had the line of credit fromBridge Bank and got approval from Citito buy our loans, funding our first loanin May of 2008. Gradually, from May of2008 onward, we increased our volumeand eventually got more investors inthe mix—GMAC, Bank of America andWells Fargo. Wachovia, which laterbecame Wells Fargo, was the first ware-house provider to give us a normalwarehouse line for $2.5 million Wegrew that warehouse line from $10 mil-lion to $20 million upward and are cur-rently at $60 million. We have otherwarehouse lines that filled out our mixas we got a bigger track record.

How has Bay Equity continued itsgrowth?In April of 2009, we started focusing ongrowing retail, with 12 retail branchoffices located in California andWashington. We also have 28 wholesaleaccount executives in 10 western states,Our wholesale/retail mix is probably65/35, and since funding our first loan,we’ve done over $3.5 billion in volume

and more than 9,500 loans. Our busi-ness model is based on a culture ofresponsible lending, hard work anddedication to providing financing to ourcustomers. In 2010, we made greatprogress in completing our executiveteam. Our management team is madeup of industry veterans with experiencein secondary marketing, finance, opera-tions, compliance, credit and humanresources. We are working hard to leavethe entrepreneurial phase of our com-pany’s development behind us and tohave the ability to scale. As long as wecan stay safe and compliant, and makesure that we are doing the right thing bykeeping the ship safe and sound, we aregoing to be set up for success. We’renow selling direct to Fannie Mae, which

is exciting especially in light of therecent volatility in the marketplace.Whether it be large loan aggregatorsleaving the correspondent space, orchanges in the way servicing is valuedand accounted for, we feel it’s impor-tant to be able to sell direct to the agen-cies as another option for our daily bestexecution and loan delivery.

Do you think there is a future in pri-vate-labeled products?Yes I do, but I don’t think we’re quitethere yet. Private capital will need tocome in and fill the void left from thelack of any securitization market out-side of the agency products. I thinkoriginators like Bay Equity will seeopportunities to find niches for new

Brett McGovern, PresidentBay Equity Home Loans

“Government regulations have added yet another layer of complexity to the difficulty of running a mortgage business in this environment,

so our model works very well for mortgage brokers.”

How has your profit-per-loan changed over the pastfew years?There is a great deal morecompliance that must beperformed these days asopposed to 2008. Thethings we have to do nowto get a loan through thepipeline, known in our com-pany as “manufacturingquality,” has changed dra-matically. We now complywith newer requirementslike Fannie Mae’s LoanQuality Initiative which helptighten the overall quality ofthe loans as they head to thesecondary market, in addi-tion to other compliancecontrols. The barriers toentry are much greater thanthey use to be.

Our profit margins fluctu-ate based on market condi-tions and how things arewith the rates, but it hasbeen tougher to operate.Those who can master thesecompliance issues will dovery well moving forward.

What would you consideryour greatest accomplish-ment in the industry?We have weathered thestorm so far, from startingBay Equity as the marketwas deteriorating in 2007,to overcoming the chal-

lenges of getting a mortgage bank start-ed with no track record. We have beenable to get our company to the pointfrom a balance sheet perspectivethrough retained earnings where wenow are considered a quality counter-party and are eligible for key industryprograms that will help us get to thenext level. We would like to take whatwe have accomplished and use that tobecome one of the next successful mid-level lenders in the marketplace. Wethink we are well on our way.

Do you have any regrets?We have definitely made mistakes asany entrepreneurial company doeswhen just starting out and trying tomake it. We probably would have start-ed building our retail channel rightaway, but I think that being mostlywholesale for the first year or so helpedus overcome some of the growing painsthat you experience as you are trying to

“Bay Equity can beat the big banks on price,lower the cost to originate and deliver

greater service. It’s a real value proposition for us against the banks that have most

of the market share.”

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products that make sense for the bor-rower. Combine this ability to originatewith the private capital required to takeit to the securitization market, andyou’ll see successful new products enterthe market. Just when that might hap-pen is still up for speculation. It’s likelythat a jumbo product that fills the voidleft by reduced agency high-balanceloan limits, but that still has the under-writing quality of an agency loan will befirst to the market.

What is it like working so closelywith your two brothers, Jon andCasey McGovern?It’s great. We’re a pretty tight-knit fam-ily. Over time and over the develop-ment of Bay Equity, we have identifiedour key roles and what we are in chargeof. I oversee secondary and finance,and serve as the main contact for thirdparties like investors or warehouse lineproviders. I also spearhead raising cap-ital and investor relations. We havedone a couple of rounds of preferredequity and did a subordinated debtround a few years ago. It bolsters ourbalance sheet and provides additionalcapital to grow the company. My broth-er Jon oversees human resources, oper-ations and the IT department, while myother brother Casey oversees sales inboth the wholesale and retail channels.We try and separate our duties andresponsibilities as to maximize our timeas much as possible.

What led to Bay Equity branchingout into retail in 2009, and whatfactored into the broker-to-bankerprograms?The writing was clearly on the wall in2009, with regulations looming and thewholesale origination channel underincreased scrutiny. We felt like it wasimportant for Bay Equity to becomemore diversified, by not just relying onthe wholesale channel, but to also havea strong retail network. The regulatoryenvironment helped push this agendawith changes in both disclosure laws, aswell as the way loan officers were to becompensated. Brokers began to take alook in the mirror and assess whether itwas more advantageous to be underthe mortgage banking umbrella.

There are a number of mortgagebrokers who see the value of rolling inunder a mortgage banking platformlike us. Bay Equity handles many of theadministrative tasks that have becomeburdensome to independent mortgagebrokers, such as accounting, humanresources, compliance, licensing, andother administrative tasks which take

away time from mortgage brokers, andin turn, frees them up to do what theydo best … originate loans. Governmentregulations have added yet anotherlayer of complexity to the difficulty ofrunning a mortgage business in thisenvironment, so our model works verywell for mortgage brokers.

We want to support our customer, nomatter who they are. We think thewholesale market will stick around.There will be a certain percentage ofthe originator market who will want tobe independent and run their own busi-ness like brokers in this environmentand we are going to support them asmuch as we can. But if a certain per-centage of that broker community islooking at joining a mortgage bank, wewant to have a very competitive andappealing platform for them to enter-tain. We’ve been pretty successful inrecruiting, but have also been veryselective.

Could you define which businessmodels are best for the mortgagebroker and which are best for themortgage banking branch?There is just such a mixed bag out therethat I don’t think you can pin it down tosaying that a certain model works best.I think it’s more in each individual cir-cumstance and how professionally runthe mortgage brokerage operation is.Bay Equity has a diverse group of retailoffices that drum up business in all dif-ferent ways, from a call center model topurchase business-driven realtor rela-tionships, to long time LOs who havetheir own book of business. We alsohave a new branch in San Francisco thatfits the last category. Manny Kagan’soffice is the longest-running mortgagebrokerage in San Francisco, havingopened its doors in 1984. Manny hasloan officers who have been with himfor years and who have their own bookof business. He does a lot of purchasebusiness with Realtor relationships.Manny has found that the banking plat-form works well especially where histeam works with the same internal sup-port staff, including underwriters, fun-ders, etc. You get a lot of close coopera-tion and chemistry with one group ofpeople, and you get the attention thatyou need instead of putting 10 percentof your business with a lender whichmakes you just a number amongst allthe other loans.

At the Mortgage Bankers Association(MBA) Annual Conference in October,one of the speakers mentioned that in2008, it was taking 30 days to close a

loan, and in 2010, it was taking anaverage of 52 days to close a loan.What do you feel has caused that timedelay and what is the typical closingtime for a Bay Equity loan?There has been a lot of consolidation inthe industry, and the big banks haveswallowed up a lot of the market share.The big banks have the dominant mar-ket share nowadays, and I think that iswhy you see this difference due to thesheer volume of business they aredoing. When rates went under the fourpercent mark four months ago, the turntime for a refinance went to 90 days atsome big banks. An independent mort-gage banker like Bay Equity can betterstreamline that process. Currently, wecan close a loan in 21 days based uponthe volume that we are doing and thestructure of our operations. Bay Equitycan beat the big banks on price, lowerthe cost to originate and deliver greaterservice. It’s a real value proposition forus against the banks that have most ofthe market share. continued on page 18

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By Dave Hershman

I still remember twoevents that happenedwhich shaped mycareer in the mort-gage industry some30 years ago. Event

number one involves my entry into themortgage business, which was as ran-dom as it could be. I had worked ingovernment out of college. Six years inthe State of North Carolina AttorneyGeneral’s Office, during which I also fin-ished my master’s degree and workedon a Ph.D in public policy. My next twoyears were spent on Capitol Hill man-aging an office for a congressman.

As the two-year term ended, I waslooking feverously for opportunities. Ihappened to mention this fact to agroup of people I played racquetballwith on a weekly basis. It turns out thatone owned a real estate company andanother ran that real estate company’smortgage entity. One was a mortgageinsurance representative. I didn’t evenknow what mortgage insurance was.

The owner of the company said tocome down and talk with them. When Imet with the president of the mortgagecompany, he “encouraged” me tobecome a Realtor. Translation: I am notreally that interested in having you as aloan officer. When I went to see theowner of the real estate company, hesaid, “You will become a loan officer.”

I went back down to Tim and said,“Al said I should become a loan offi-cer.” Tim said, “I guess you are going tobecome a loan officer.”

I came in the first day and a staffmember said, “You are a loan officer,right?” I guess it was a mistake, but Isaid, yes. She said, there was someonein the waiting room that needed a loanapplication taken, the loan officer didnot show up. Right there I should havequestioned something, but it is the firstday and you don’t rock the boat on dayone. She gave me a bunch of forms andI took them, and as I walked away, shesaid, “Keep in mind, it is a VA loan.” Ithought to myself, no problem. I am,after all, from the state of Virginia.

When I was done, I gave the forms tothe staff person who turned out to bean underwriter. She looked them over

and told me that I was going to be agreat loan officer. I asked her how shecould know that. She replied, “Becauseyou filled in all the blanks on theforms.” I laughed because I thoughtshe was joking. Little did I know …

Event number two came about 18months later. My boss who hired mewas gone and another president of themortgage company was hired. In that18-month period, I had originated andclosed more than 550 loans. I was farand away the “top” producer. The newpresident had big plans to expand themortgage company. He asked me if Iwanted to manage. “Sure, no prob-lem,” was my reply. Of course, no onetold me what a “manager” of loan offi-cers actually did. So I called theMortgage Bankers Association (MBA)and asked for their books on manage-ment. They said they had books on sec-ondary, underwriting, sales and a hostof other topics. No books on mortgagemanagement existed. So not only did Ilearn to manage in this industry on myown, but in my third year in the indus-try, I also wrote the MBA’s book onmanagement, Managing a BranchOffice. Don’t call the MBA for it becauseit’s out of print. That is how old I am, Ihave books that I have written that arenow out of print.

Now, let’s get back to the manage-ment dilemma. Training programs forloan officers in this industry are prettymuch non-existent. It is true that thegovernment now asks us to get licensedand requires training, at least for thosewho don’t work for a federally-char-tered bank. But this licensing traininghas nothing to do with a loan officerbeing successful at their job.

Training for managers is even lessprevalent. Keep in mind that these arethe most important leaders in our indus-try. They are supposed to lead the rankand file—those who are on the front-lines. They are supposed to train theloan officers, processors and other oper-ations personnel, and they get no help indoing their jobs. When I held nationalmanagement conferences across thenation, I had hundreds upon hundredscome to me and thank me profuselybecause they felt alone and lost.

The Management Dilemma


nmp mortgage professional continued from page 17

grow something like this. We didn’t bringon retail branches until we were moremature and had our legs underneath us. Ialso would have tried harder to diversifyour investor mix earlier with the additionof the agency outlets.

Over the next two years, what do youthink will be the greatest opportunitiesin the field of mortgage origination?I think we will see continued consolidationin the industry. It’s getting tougher to oper-ate as a mortgage business, due in largepart to the regulatory environment thathas been created. And while it has beentough, it has increased the professionalismof the mortgage loan originator. Therearen’t many part-time originators left, asnow, loan originators have to be licensedthrough the Nationwide MortgageLicensing System (NMLS), obtain educationcredits, etc. What is left is a population ofMLOs who are good at what they do andcan increase their market share.

There are a number of different ways tooriginate loans. We are focused on the pur-chase market. We want to be known as adependable and reliable purchase lenderthat Realtors and LOs can feel safe sendingtheir purchase loans to. That’s a naturalhedge against the rates rising. We’d like tonot be at the mercy of a volatile interestrate market or rising rates. Hopefully, atsome point, the real estate market bot-toms out, becomes healthier and we cansee the market recover and sales pick upagain, and that’s where we want to posi-tion. We want to have a strong network ofbranches that are purchase-driven and aresituated in local strong real estate marketsand have a reputation as a reliable choicefor purchase loans.

Earlier you mentioned Jim Corbett asyour mentor. Do you have any othermentors who may have guided yourprofessional career?At Bay Equity, we have a pretty strongteam that collaborates and navigatesthrough a variety of issues on a daily basis.Jim Corbett is definitely a mentor of minein a bigger sense of providing me with theentrepreneurial spirit to seize the opportu-nity and start Bay Equity. He showed methat if you do things in a sound, ethicaland transparent way, success will follow.

Charles Hine also was an importantmentor for me as I grew up in the businessworld in commercial real estate. Charleswas instrumental in teaching me valuablelife lessons, including how to treat people,how to handle yourself with honesty andintegrity, the value of a strong work ethic,and how to make good decisions in light ofthe bigger picture.

Do you think there is an opportunityfor newcomers who are looking toget into the mortgage business?What advice would you pass on tothose new to the industry?In this environment, it is very difficult just todo what it takes to get the right approvals,

with the biggest barriers being net worthand experience. We have been fortunateenough to do well over the last few years,and have retained our earnings and main-tain our balance sheet to be a strong count-er party in this environment. But to do it allover again and see that kind of successwould be difficult. Today, you see some ofthe older industry players who have beenout of the game now getting back in. I thinkpeople see our current marketplace as agood time to return, but these are individu-als who have enjoyed past success and aretaking another run at it and know what theyare getting into.

Are there any industry-related issues thatkeep you up at night? What do you see asthe biggest threats to your business as amulti-channel mortgage banker?The uncertainty of the regulatory environ-ment is a big concern, along with theuncertainty of the Consumer FinancialProtection Bureau (CFPB). The CFPB is anunknown for a lot of us who are workinghard to maintain a compliant business andsimply do business the right way. Will newlaws be passed that will further impact theway we do business? At what point will allof this ease up? While the laws passed haveweeded out a lot of the part-timers in theindustry, uncertainty about the state of theregulatory environment remains.

The landscape of the industry is alsochanging. Big banks like GMAC and Bank ofAmerica are getting out of correspondentlending and pulling reigning in their mort-gage divisions. What will the future be like?Will private capital replace the big loanaggregators? Will rates continue to drop?These are just a few of the issues that wetrack on an ongoing basis.

What do you see in the future for BayEquity?I think we have a tremendous opportunityfor continued growth. The big banks are alittle dysfunctional in some measure withthe way they are pulling back from themarketplace. Bay Equity’s geographic foot-print is limited to California, but we havemeasures in place to expand both ourwholesale and retail channels initially intothe northwestern United States. We areadding new branches and have the rightteam members in place to lead this expan-sion. We have opened up a Portland, Ore.office as a third operations center.

I think with the continued migration ofmortgage brokers to mortgage bankers, wewill keep adding experienced professionalsto our team as we expand throughout theWest Coast. As long as we continue to man-ufacture loans properly and continue togrow our balance sheet, the future of BayEquity is very bright.

The next phase of our business is goingto focus on re-engineering Bay Equity …how we do things, continuing to improveour totally paperless operation, making themost of the efficiencies that come withtechnology and upgrading to better tech-nology platforms.

SEC Charges Former GSEHeads for MortgageSecurities Fraud

The Securities &Exchange Commission(SEC) has charged sixformer top executivesfrom Fannie Mae andFreddie Mac with secu-

rities fraud, alleging they knew andapproved of misleading statementsclaiming the companies had minimalholdings of higher-risk mortgage loans,including sub-prime loans. Fannie Maeand Freddie Mac each entered into aNon-Prosecution Agreement with theSEC in which each company agreed toaccept responsibility for its conduct andnot dispute, contest, or contradict thecontents of an agreed-upon Statementof Facts without admitting nor denyingliability. Each also agreed to cooperatewith the Commission’s litigation againstthe former executives. In entering intothese Agreements, the SEC consideredthe unique circumstances presented bythe companies’ current status, includ-ing the financial support provided tothe companies by the U.S. Departmentof the Treasury, the role of the FederalHousing Finance Agency (FHFA) as con-servator of each company, and the coststhat may be imposed on U.S. taxpayers.

Three former Fannie Mae execu-tives—former Chief Executive OfficerDaniel H. Mudd, former Chief RiskOfficer Enrico Dallavecchia, and formerExecutive Vice President of FannieMae’s Single Family Mortgage business,Thomas A. Lund—were named in theSEC’s complaint filed in U.S. DistrictCourt for the Southern District of NewYork.

The SEC also charged three formerFreddie Mac executives—formerChairman of the Board and CEO RichardF. Syron, former Executive VicePresident and Chief Business OfficerPatricia L. Cook, and former ExecutiveVice President for the Single FamilyGuarantee business Donald J.Bisenius—in a separate complaint filedin the same court.

“Fannie Mae and Freddie Mac execu-tives told the world that their subprimeexposure was substantially smaller thanit really was,” said Robert Khuzami,Director of the SEC’s EnforcementDivision. “These material misstate-ments occurred during a time of acuteinvestor interest in financial institu-tions’ exposure to subprime loans, andmisled the market about the amount ofrisk on the company’s books. All indi-

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JANUARY 2012viduals, regardless of their rank or posi-tion, will be held accountable for per-petuating half-truths or misrepresenta-tions about matters materially impor-tant to the interest of our country’sinvestors.”

The SEC is seeking financial penal-ties, disgorgement of ill-gotten gainswith interest, permanent injunctiverelief and officer and director barsagainst Mudd, Dallavecchia, Lund,Syron, Cook, and Bisenius. Both law-suits allege that the former executivescaused the federal mortgage firms tomaterially misstate their holdings ofsub-prime mortgage loans in periodicand other filings with the Commission,public statements, investor calls, andmedia interviews. The suit involvingthe Fannie Mae executives also includessimilar allegations regarding Alt-Amortgage loans. The suit against theformer Fannie Mae executives allegesthey made misleading statements — oraided and abetted others—betweenDecember 2006 and August 2008. Theformer Freddie Mac executives arealleged to have made misleading state-ments—or aided and abetted others—between March 2007 and August 2008.

The SEC’s complaint against the for-mer Fannie Mae executives alleges that,when Fannie Mae began reporting itsexposure to sub-prime loans in 2007, itbroadly described the loans as those“made to borrowers with weaker credithistories,” and then reported—with theknowledge, support, and approval ofMudd, Dallavecchia, and Lund—lessthan one-10th of its loans that met thatdescription. Fannie Mae reported thatits 2006 year-end Single Family expo-sure to subprime loans was just 0.2 per-cent, or approximately $4.8 billion, ofits Single Family loan portfolio.Investors were not told that in calculat-ing the Company’s reported exposureto subprime loans, Fannie Mae did notinclude loan products specifically tar-geted by Fannie Mae towards borrow-ers with weaker credit histories, includ-ing more than $43 billion of ExpandedApproval, or “EA” loans.

Fannie Mae’s executives also knewand approved of the decision to under-report Fannie Mae’s Alt-A loan expo-sure, the SEC alleged. Fannie Mae dis-closed that its March 31, 2007 exposureto Alt-A loans was 11 percent of its port-folio of Single Family loans. In reality,Fannie Mae’s Alt-A exposure at thattime was approximately 18 percent of

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By John Walsh

For the past three-and-a-half years,it is very accurate

to say that the mort-gage industry hasundergone a battle for

its very survival. One of the deepestrecessions in our nation’s history, thesharpest decline in single-familyhousing values since the GreatDepressions, and the highest unem-ployment rates since the 1970s haveall combined to make the past fewyears the most difficult ever faced inour industry. The survivors of this dif-ficult time must focus on being partof the solution and building astronger mortgage industry.

Over the next few months, you willlikely read numerous prognostica-tions from economists, politiciansand Wall Street analysts of what willtranspire in the mortgage industry in2012. What I hope you will find dif-ferent about my thinking below isthat it comes from someone who is onthe frontlines working with borrow-ers, originators, processors, under-writers, account executives andinvestors every day.

The following are five key trendslikely to impact the mortgage industryand housing market in 2012:

1. Mortgage rates will remain attrac-tive through at least the first half ofthe year

2. Home values will slowly stabilize3. Innovative products will begin to

reappear4. The industry will grapple with regu-

latory uncertainty5. New industry leaders will emerge

Mortgage rates willremain attractivethrough at least the firsthalf of the yearAs we enter 2012, two competingforces are impacting mortgagerates—a slowly strengthening U.S.economy, and a growing sovereigndebt and banking crisis in Europe.But for the situation in Europe, mort-gage rates would have likely alreadymoved higher, perhaps to a rate of

4.5 percent on the benchmark 30-yearfixed-rate loan. However, with bondyields increasing throughout Europe(not just in initial trouble spots likeGreece and Italy), U.S. mortgage-backed securities (MBS) remain a safehaven for investors.

This “push-me, pull-me” interestrate environment may or may notlast. My view is that both competingforces will continue into 2012, butthat the situation in Europe could sta-bilize, thereby clearing the way forrates to rise modestly, along withemployment, consumer spending andinflation. If rates rise to near five per-cent by the end of 2012 as theMortgage Bankers Association (MBA)

forecasts, we will see a major shift inloan mix in favor of purchase loans.

The MBA also says, “A faster eco-nomic recovery, led by the housingmarket, would mean faster homeprice growth and more sales volume,increasing purchase originationssomewhat, but would cut off refi-nance volume sooner than in ourforecast.” Barring a major shock fromEurope, I expect a slow recovery basedon recent employment, retail sales,industrial production and housingstarts data.

Home values will slowly stabilizeWhat are the three rules of real

estate? Location … I know—nobodywants to hear that again, but thetruth of the matter, as it relates toproperty value stabilization, is that itwill occur at different rates depend-ing on geographically-specific crite-ria. Areas of the U.S. that see thestrongest growth and have the small-est foreclosure/unsold inventorieswill see the quickest progress. Signsof stabilization are already appearing

in some areas of the U.S. ZillowChief Economist Dr. StanHumphries says, “While we

still have a ways to go in termsof home value depreciation, the

pace at which home values arefalling has declined considerably

during the course of this year. Thisslower pace signals that stabilizationis on the horizon.”

As the job picture improves, thenumber of homes falling into foreclo-sure will decline. More significantly,new households who have not felt com-fortable purchasing a home will beginto gain confidence in their long-termprospects and begin to take advantageof the very affordable housing opportu-nities available. Single-family homeprices will likely be flat or see a mar-ginal increase in 2012.

Innovative products will reappearCongress is set to raise Federal HousingAdministration (FHA) lending limitsback to $729,750 in designated high-cost areas across the country. Yet, giventhe opportunity to raise the limits forFannie Mac and Freddie Mac loans,they chose to leave the limit at thelower level of $625,500. This may openthe market to new jumbo loan productsfrom lenders, and we are already expe-riencing progress in this area.Additionally, there are signs that somelenders are developing non-agencyproducts which will respond to unmetmarket demands and provide newinvestment opportunities for investorsseeking higher returns. Any new prod-ucts developed will be carefullydesigned and underwritten, but willhelp open responsible homeownershipto more people.

The MortgageBattlefield of 2012:

A View From the Frontlines


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nmp news flash continued from page 19

its Single Family loan holdings. Themisleading disclosures were made asFannie Mae’s executives were seekingto increase the company’s market sharethrough increased purchases of sub-prime and Alt-A loans, and gave falsecomfort to investors about the extent ofFannie Mae’s exposure to high-riskloans, the SEC alleged.

In the complaint against the formerFreddie Mac executives, the SEC allegedthat they and Freddie Mac led investorsto believe that the firm used a broad def-inition of subprime loans and was dis-closing all of its Single-Family subprimeloan exposure. Syron and Cook rein-forced the misleading perception whenthey each publicly proclaimed that theSingle Family business had “basically nosub-prime exposure.” Unbeknown toinvestors, as of December 31, 2006,Freddie Mac’s Single Family business wasexposed to approximately $141 billion ofloans internally referred to as “sub-prime” or “sub-prime like,” accountingfor 10 percent of the portfolio, and grewto approximately $244 billion, or 14 per-cent of the portfolio, as of June 30, 2008.

FHA Grants Year-LongExtension of Anti-FlippingRegulations

Carol Galante,A c t i n gCommissionerof the FederalHousing Ad-

ministration (FHA), has announced thatthe FHA will extend its temporary waiv-er of the anti-flipping regulations in2012 through Dec. 31, 2012. The exten-sion was granted in an effort to contin-ue stabilizing home values and improveconditions in communities with highforeclosure activity.

With certain exceptions, FHA regula-tions prohibit insuring a mortgage on ahome owned by the seller for less than90 days. In 2010, FHA temporarilywaived this regulation through Jan. 31,2011, and later extended that waiverthrough the remainder of 2011. Thenew extension will permit buyers tocontinue to use FHA-insured financingto purchase U.S. Department ofHousing & Urban Development (HUD)-owned properties, real estate-owned(REO) properties, or properties resoldthrough private sales. It will allowhomes to resell as quickly as possible,helping to stabilize real estate pricesand to revitalize neighborhoods andcommunities.

“This extension is intended to acceler-ate the resale of foreclosed properties inneighborhoods struggling to overcomethe possible effects of abandonment andblight,” said Galante. “FHA remains a crit-ical source of mortgage financing andstability and we must make every effortthat to promote recovery in everyresponsible way we can.”

The extension is effective through

Dec. 31, unless otherwise extended orwithdrawn by the FHA. All other terms ofthe existing Waiver will remain the same.The Waiver contains strict conditions andguidelines to prevent the predatory prac-tice of property flipping, in which prop-erties are quickly resold at inflated pricesto unsuspecting borrowers. The Waivercontinues to be limited to sales meetingthe following conditions:� All transactions must be arms-

length, with no identity of interestbetween the buyer and seller orother parties participating in thesales transaction.

� In cases in which the sales price ofthe property is 20 percent or moreabove the seller’s acquisition cost,the Waiver will only apply if thelender meets specific conditions anddocuments the justification for theincrease in value.

� The Waiver is limited to forwardmortgages, and does not apply to theHome Equity Conversion Mortgage(HECM) for purchase program.

MBA Announces the Completion ofMISMO Transition

The Mortgage Bank-ers Association (MBA)has announcedthat it has complet-

ed the transition, announced inSeptember, and will resume support forthe Mortgage Industry StandardsMaintenance Organization Inc.(MISMO). With the successful transition,MISMO will now focus efforts on regula-tory implementation and advocatingfor broader adoption of data standardsthroughout the industry.

“MBA supports greater efficiency andlower costs throughout the industry byadvocating for broad adoption of indus-try consensus standards developed byMISMO. We are actively engaging bothregulators and industry in this effort,”said MBA President and CEO David H.Stevens. “MBA will also provide educa-tional opportunities aimed at helpingindustry and government better under-stand and implement MISMO standards.Standardization and transparency arecritical to the return of investor confi-dence and liquidity in the mortgage mar-ketplace, and MISMO has a crucial role toplay. I would recommend that MBAmembers become MISMO subscribers inorder to help guide this effort.”

To assist with these efforts, MBA hashired Cindy Bojokles as its new directorof industry standards. In this role,Bojokles is responsible for supportingand advancing the activities of MISMO.Bojokles will work closely with industryexecutives to increase the standardsavailable to the industry. Bojokles willalso help government agencies under-stand the benefits of adopting the vol-untary consensus standards developedby MISMO.

valuenation continued from page 10

compliant. The platform may alsorun the appraisal through UCDP’sknown requirements before it issubmitted, providing alerts on any“hard stops” that might prevent theloan from processing for GSE review.Why is this important? Because itallows lenders to identify and han-dle problems before the GSEs getinvolved to assist in maintaining apositive seller/servicer relationship.

� Benefit #3: Advanced valuationmanagement platforms also cre-ate significant improvements invendor management processes byinstantly identifying marginalperformers and re-directingassignments to the best perform-ing vendors to save time and

money and ultimately increasecustomer satisfaction.

The Dec. 1, 2011 deadline forULDD compliance is now past, andthe final March 19, 2012 deadline forfull UCDP compliance is swiftlyapproaching. It’s not too late forlenders to take a critical look at whatthey can manually process throughthe online portal versus the auto-mated efficiency and additional ben-efits in data uniformity that can berealized with a valuation manage-ment solution.

David Rasmussen is senior vice presidentof operations at Veros Real EstateSolutions. For more information, call(714) 415-6300 or visit Veros.com.

The industry will grapple with regulatoryuncertaintyThe coming 2012 elections could be atumultuous time for the mortgageindustry. Not surprisingly, the mort-gage and banking industries are likelyto be the subject of much critiqueand demagoguery during the cam-paign. With Fannie Mae and FreddieMac potentially seeking billions morein support from taxpayers, and con-sumer sentiment so negative towardbanks and Wall Street, expect regula-tory agencies to come down hard onthe financial services industry as partof a populist effort to attract votes.Throughout the year, it will seem asthough our industry is in a constantstruggle to demonstrate our value tothe country.

We will have to participate in thedebate over the role of government inmortgage finance. We will have toengage in the effort to adopt new regu-lations that are part of the Dodd-Franklegislation. According to TomDonatacci, executive vice president ofClayton Holdings, “Among the majorunanswered questions regarding Dodd-Frank: What’s a qualified mortgage?How much ‘skin in the game’ will berequired of the issuer and seller? Howwill the conflicts-of-interest provisionsimpact securitization and various par-ties’ ability to buy and sell securities?What is the future role of the ratingagencies?” New regulations are certain-ly coming, but their scope and impactare very much up in the air.

New industry leaderswill emergeWith the challenges of the last few

years forcing hundreds of thousandsof 2007-era employees, thousands ofsmall businesses and dozens of largefirms out of the mortgage industry, itis somewhat surprising that somebrave souls would invest their timeand resources to develop, grow andimprove the industry in 2012.

But that is exactly what I see whenI survey they the mortgage landscape.I see:

� Entrepreneurs and business profes-sionals battling to build a sustain-able industry;

� New and better technology thatmakes our tasks easier and the loansoriginated of higher quality;

� New originators committed to con-sumer-engagement and education;and

� Investors eager to bring safe, reliablereturns to their clients.

The “new” mortgage industry isemerging with leaders who are focusedon efficiency, accountability, and soundethical behavior. That sounds like agreat industry to be part of!

The year 2012 will not present areturn to the industry of the past, but itwill represent a real foundation for asuccessful future. I, for one, cannot waitfor 2012 to unfold, so let the battlesbegin!

John Walsh is president of Milford,Conn.-based Total Mortgage Services.John founded Total Mortgage Servicesin 1997 with a customer-centricapproach and a mission of responsiblelending. He may be reached by e-mail [email protected] or visitTotalMortgage.com.

the mortgage battlefield continued from page 20

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controlling credit risk continued from page 15

ther monitor and mitigate credit risk.Often, management offers a pledge toimplement corrective action.

Preparation is PreventionCompliance cannot be reverse engi-neered. I have stated many times thatpreparation is prevention. Working toevaluate credit risk is critical to the stay-ing power needed by any financial insti-tution involved in the loan flow process.

Some mistakes may have a minoreffect. But there are costly mistakes thatbring with them virtually catastrophicconsequences. It is unacceptable andindefensible to attempt to fix mistakesbelatedly, when they could have beenavoided in the first place. And, for themost part, the tardy and delayedapproach just does not work.

Allowing exposure to credit risk issuch a potentially fatal and fundamen-tal flaw that there really is often no wayto undo the damage done by risk man-agement failures. However, by using theabove-mentioned tools to determineQuantity of Risk and Quality of RiskManagement, a financial institutionmay still have the proactive opportuni-ty to be stable, strong, and vibrant.

Certain information provided in this

article is based on the research andwork I have done in developing one ofmy firm’s risk management tools,called the CORE Compliance Matrix®.This may be part of a due diligencereview. It is a unique analysis thatoffers, among other things, a compre-hensive assessment of a financialinstitution’s compliance with federaland state regulations, thereby provid-ing quantitative ratings of regulatoryrisk. A CORE® review consists of an in-depth evaluation of a financial institu-tion’s CORE® features: ComplianceProgram (C), Organizational Structure (O),Regulatory Risk (R), and EnforcementStrategies (E). For more information aboutthe CORE Compliance Matrix®, please visitour Web site at www.lenderscompliance-group.com.

Jonathan Foxx, former chief complianceofficer for two of the country’s top pub-licly-traded residential mortgage loanoriginators, is the president and manag-ing director of Lenders ComplianceGroup, a mortgage risk managementfirm devoted to providing regulatorycompliance advice and counsel to themortgage industry. He may be contactedat (516) 442-3456 or by e-mail [email protected].

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“Cindy has spent over 15 years work-ing on data standards, data quality andbusiness solutions for the mortgageindustry. Her detailed knowledge oftechnology and business processes willprove invaluable to MBA and the mort-gage industry as it continues to advanceMISMO and industry standards,” saidStevens.

Federal Agencies JoinForces to Prevent HAMPand Loan Mod Fraud

The Office of theSpecial InspectorGeneral for theTroubled Asset

Relief Program (SIGTARP), the ConsumerFinancial Protection Bureau (CFPB), andthe U.S. Department of the Treasury haveannounced the creation of a joint taskforce to combat scams targeted at home-owners seeking to apply for the HomeAffordable Modification Program (HAMP).SIGTARP, CFPB and the Treasury have part-nered to protect taxpayers by investigatingand shutting down these scams and byproviding education programs to vulnera-ble homeowners. The joint task force alsoissued a consumer fraud alert to protecthomeowners from HAMP-related mort-gage modification scams. The fraud alertwill also be provided directly to home-owners eligible for HAMP.

“The goal of our consumer fraud alert isto empower homeowners with the knowl-edge of how to recognize and avoid thesescams,” said Christy Romero, DeputySpecial Inspector General for SIGTARP.“These scams prey upon the most vulnera-ble homeowners as they desperately holdout hope of saving their homes. SIGTARP,the CFPB and Treasury want to make surethat homeowners know a scam when theysee one and know where to turn for help.SIGTARP will work with the CFPB andTreasury in this joint task force and withother law enforcement partners to shutdown these scams and to ensure that theperpetrators pay for their crimes.”

SIGTARP, CFPB and the Treasury investi-gate mortgage modification schemes,among other things, in which companiescharge struggling homeowners a fee inexchange for false promises of loweringthe homeowner’s mortgage debt or pay-ments through HAMP, a foreclosure pre-vention program funded by the TroubledAsset Relief Program (TARP) and adminis-tered by the Treasury.

“Mortgage scams harm not only home-owners but legitimate businesses and themarket as a whole,” said Richard Cordray,chief of enforcement for the CFPB. “Byjoining forces with SIGTARP and Treasury,the CFPB hopes to protect Americans andthe integrity of one of the largest consumerfinancial markets in the U.S.”

Rapidly Growing REO Inventory Going to Investors, Not Owner-Occupied Buyers

New Vista AssetManagement, aSan Diego-basedprovider of realestate services

for banks and other sellers of foreclosedresidential homes, has published theresults of a three-year study examiningbuyer types in 18 U.S. counties hit hardestby America’s mortgage crisis. The studyuses data extracted from local recorder,courthouse and tax assessment records todetermine whether the purchasers buyingforeclosed houses from banks, the U.S.Department of Housing & UrbanDevelopment (HUD), the government-sponsored enterprises (Fannie Mae andFreddie Mac), are owner-occupants orabsentee owners using single familyhomes as rental or vacation properties.

New Vista’s data indicates that the per-centage of real estate-owned (REO) homessold to owner occupant buyers hasdecreased in almost every market ana-lyzed by the company in a study thatbegan tracking real estate sale transactionsclosed in the first quarter of 2009 andincludes consecutive quarterly datathrough the third quarter of 2011.

“Although, quarter-by-quarter, we haveobserved some market-specific increases,over the entire period, owner occupancyrates for REO sales have broadly weak-ened,” said Brian Hurley, New Vista’s pres-ident and chief operating officer. “Witheleven consecutive quarters of data, wecan look beyond both seasonality and thetemporary impact of demand stimuli suchas the homebuyer tax credit, and observea clear pattern of decline.”

In Los Angeles County, Calif., the NewVista data shows 79.36 percent of single-family REO houses were purchased byowner occupants in 2009, compared withonly 60.32 percent in the third quarter of2011. Most counties covered by the studysaw declines of more than five percentagepoints during the same period, with a fewdropping more modestly.

According to the New Vista study, onlyone county included in the Index (WayneCounty, Mich.) had an owner occupancyrate for single-family REO sales below 50percent in 2009. By the third quarter of2011, owner occupancy rates for REO salesin an additional four of the studied coun-ties had fallen below 50 percent, includingMaricopa County, Ariz.; Osceola County,Fla.; Miami-Dade County, Fla.; and ClarkCounty, Nev.

“The decline in owner occupant sales inMaricopa County over the past two yearshas altered the fabric of our neighbor-hoods,” said Patricia Garcia Duarte, presi-dent of Neighborhood Housing Services ofPhoenix and chair of the ArizonaForeclosure Prevention Task Force. “Weneed to look carefully at this trend andrefocus on giving homebuyers a chance toown a piece of the American Dream.”

BofA Reaches $335 MillionSettlement WithGovernment OverCountrywide Discriminationand Steering

The U.S. Departmentof Justice (DOJ) hasfiled its largest resi-

dential fair lending settlement in history toresolve allegations that Countrywide


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Financial Corporation and its subsidiariesengaged in a widespread pattern orpractice of discrimination against qual-ified African-American and Hispanicborrowers in their mortgage lendingfrom 2004 through 2008. The settle-ment provides $335 million in compen-sation for victims of Countrywide’s dis-crimination during a period whenCountrywide originated millions of res-idential mortgage loans as one of thenation’s largest single-family mortgagelenders. In addition, the settlementrequires Countrywide to implementpolicies and practices to prevent dis-crimination if it returns to the lendingbusiness during the next four years.Countrywide operates as a subsidiary ofBank of America, but does not originatenew loans.

The settlement, which is subject tocourt approval, was filed in the U.S.District Court for the Central District ofCalifornia in conjunction with thedepartment’s complaint which allegesthat Countrywide discriminated bycharging more than 200,000 African-American and Hispanic borrowers high-er fees and interest rates than non-Hispanic white borrowers in both itsretail and wholesale lending. The com-plaint alleges that these borrowers werecharged higher fees and interest ratesbecause of their race or national origin,and not because of the borrowers’ cred-itworthiness or other objective criteriarelated to borrower risk. The U.S. alsoalleges that Countrywide discriminatedby steering thousands of African-American and Hispanic borrowers intosub-prime mortgages when non-Hispanic White borrowers with similarcredit profiles received prime loans. Allthe borrowers who were discriminatedagainst were qualified for Countrywidemortgage loans according toCountrywide’s own underwriting criteria.

“The Department’s action againstCountrywide makes clear that we willnot hesitate to hold financial institu-tions accountable, including one of thenation’s largest, for lending discrimina-tion,” said Attorney General Eric Holder.“These institutions should make judg-ments based on applicants’ creditwor-thiness, not on the color of their skin.With today’s settlement, the federalgovernment will ensure that the morethan 200,000 African-American andHispanic borrowers who were discrimi-nated against by Countrywide will beentitled to compensation.”

The complaint alleges that African-American and Hispanic borrowers paidmore than non-Hispanic White borrow-ers, not based on borrower risk, butbecause of their race or national origin.Countrywide’s business practiceallowed its loan officers and mortgagebrokers to vary a loan’s interest rateand other fees from the price it setbased on the borrower’s objective cred-it-related factors. This subjective and

unguided pricing discretion resulted inAfrican-American and Hispanic borrow-ers paying more. The complaint furtheralleges that Countrywide was aware thefees and interest rates it was chargingdiscriminated against African-Americanand Hispanic borrowers, but failed toimpose meaningful limits or guidelinesto stop it.

The complaint also alleges that, as aresult of Countrywide’s policies andpractices, qualified African-Americanand Hispanic borrowers were placed insub-prime loans rather than primeloans even when similarly-qualifiednon-Hispanic white borrowers wereplaced in prime loans. The discrimina-tory placement of borrowers in sub-prime loans, also known as “steering,”occurred because it was Countrywide’sbusiness practice to allow mortgagebrokers and employees to place a loanapplicant in a subprime loan even whenthe applicant qualified for a prime loan.In addition, Countrywide gave mortgagebrokers discretion to request exceptionsto the underwriting guidelines, andCountrywide’s employees had discre-tion to grant these exceptions.

California and NevadaAGs Merge Resources IntoMega Mortgage FraudTask Force

Attorneys GeneralKamala D. Harrisof California andCatherine CortezMasto of Nevada

have jointly announced that their stateshave entered into an alliance, theMortgage Investigation Alliance,designed to assist homeowners whohave been harmed by misconduct andfraud in the mortgage industry. By forg-ing this alliance, California and Nevadawill combine investigative resources,including litigation strategies, informa-tion, and evidence gathered throughtheir respective ongoing investigations,assisting each state as it pursues inde-pendent prosecutions. The alliance willlink the offices’ civil and criminalenforcement teams, speeding along thefull, fair and adequate investigation ofwrongdoing in the two states, whichhave experienced similar foreclosureand mortgage fraud crises.

“The mortgage crisis is a man-madedisaster that has taken a heavy toll onthe country, but it saved its worst forCalifornia and Nevada,” said CaliforniaAG Harris. “The mortgage crisis is a lawenforcement matter, and we will prose-cute to hold accountable those who areresponsible and also protect the home-owners who are targeted for fraud. I amdelighted that California and Nevadaare entering into this alliance to lever-age the best results for our investiga-tions and look forward to forging simi-


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lar collaboration with other states.”California and Nevada have been the

states hit particularly the hardest by thenation’s foreclosure crisis. In October2011, Nevada and California rankedfirst and second, respectively, for thepercentage of their housing units thatentered the foreclosure process, reflect-ing a parallel surge in foreclosures inthe two states. One in every 180 Nevadaproperties entered the foreclosureprocess in October, and one in every243 California homes received a filingthat month. In 2010, California led thenation with a total of 546,669 foreclo-sure filings (four percent of the state’shousing units), while Nevada led thenation with 9.4 percent of its homesreceiving a foreclosure filing (totaling106,160 units).

The crisis in these Western states issimilar because both states share aforeclosure system in which a bank canforeclose on a borrower’s home with-out court oversight, also called “non-judicial foreclosure.” The collectiveresult has created a rich opportunity forpredators, leading both states to makemortgage-related law enforcementaction a top priority.

“I am pleased to join forces withGeneral Harris to fight against fraudu-lent mortgage and foreclosure practicesthat continue to devastate lives, homes,and the economy in Nevada andCalifornia,” said Nevada AttorneyGeneral Catherine Cortez Masto. “Thisstrong partnership will allow our statesto make an even more concerted effortto hold fraud perpetrators accountableand ensure law-abiding homeownersreceive justice.”

HARP Refis Through GSEs Increase 11 PercentDuring Q3

Foreclosure preventionactivity by both FannieMae and Freddie Macincreased in the thirdquarter of 2011 and

totaled nearly two million foreclosureprevention actions since the beginningof conservatorship by the FederalHousing Finance Agency (FHFA) in 2008.During this period, the government-sponsored enterprises (GSEs) completedone million loan modifications, helpingborrowers stay in their homes.

According to the FHFA’s third quarter2011 Foreclosure Prevention &Refinance Report, the increase in com-pleted foreclosure prevention activityin the third quarter was driven primari-ly by loan modifications and repaymentplans. Two-thirds of all borrowers whoreceived loan modifications in Q3 hadtheir monthly payments reduced byover 20 percent. Additionally, the GSEs’cumulative refinancings through theHome Affordable Refinance Program(HARP) increased 11 percent during thethird quarter to nearly 928,600 loans.

Other findings in the 2011Foreclosure Prevention & RefinanceReport include:� The GSEs have completed nearly two

million foreclosure preventionactions since the start of conservator-ship. Nearly 1.7 million of theseactions have allowed borrowers toretain homeownership, with morethan one million being permanentloan modifications.

� Loans modified since the start ofHAMP are performing substantiallybetter compared with loans modifiedin earlier periods.

� Serious delinquency rates continuedto decline. However, the percentageof loans that have missed one pay-ment increased during Q3 of 2011.

� Real estate-owned (REO) inventorydeclined for the fourth consecutivequarter as property dispositions con-tinued to outpace acquisitions in thethird quarter.

Shadow InventoryRemains at 1.6 MillionUnits Nationwide

CoreLogic has reportedthat the current resi-dential shadow inven-tory as of October 2011

nationwide remained at 1.6 millionunits, representing a supply of fivemonths. This total was down fromOctober 2010, when shadow inventorystood at 1.9 million units, or at a seven-months’ supply, but approximately thesame level as reported this past July.Currently, the flow of new seriouslydelinquent loans into the shadowinventory has been offset by the rough-ly equal flow of distressed sales, such asshort sales and real estate-owned (REO)sales.

CoreLogic estimates the current stockof properties in the shadow inventory,also known as pending supply, by calcu-lating the number of distressed proper-ties not currently listed on multiple list-ing services (MLSs) that are seriouslydelinquent (90 days or more), in fore-closure and REO by lenders. Transitionrates of “delinquency to foreclosure”and “foreclosure to REO” are used toidentify the currently distressed non-listed properties most likely to becomeREO properties. Properties that are notyet delinquent but may become delin-quent in the future are not included inthe estimate of the current shadowinventory. Shadow inventory is typicallynot included in the official metrics ofunsold inventory.

“The shadow inventory overhang is alarge impediment to the improvementin the housing market because it putsdownward pressure on home prices,which hurts home sales and buildingactivity while encouraging strategicdefaults,” said Mark Fleming, chiefeconomist for CoreLogic.

Florida, California and Illinois


account for more than a third of theshadow inventory. The top six states,which would also include New York,Texas and New Jersey, account for halfof the shadow inventory.

Nationwide, shadow inventory isapproximately four times higher than itslow point (380,000 properties) at thepeak of the housing bubble in mid-2006.A healthy housing market should haveless than one-month’s supply of shadowinventory, which would be an easilyabsorbed stock of distressed assets withlittle or no discernible impact on houseprices, unless the inventory was geo-graphically concentrated.

Despite three million distressed salessince January 2009, a period whenhome prices were declining at theirfastest rate, the shadow inventory inOctober 2011 is at the same level asJanuary 2009.

Because shadow inventory is oftenconcentrated in suburban and exurbansubmarkets, where distressed sales com-pete with new construction sales, it is oneof the reasons why new home sales con-tinue to be weak. In normal times, newhome sales account for 12 percent of allsales, but they are currently running atseven percent of all sales.

Based on current estimates of thevisible inventory (both distressed andnon-distressed), the shadow inventory isapproximately half of all visible inven-tory listings. For every two homes avail-able for sale, there is one home in the“shadows.”

OCC Reports Q3Foreclosures Rise 21.1 Percent

The performance of first-lien mortgages servicedby large national banksand federal savings asso-ciation was stable, but

delinquencies remained elevated duringthe third quarter of 2011, according to thequarterly Mortgage Metrics Reportreleased by the Office of theComptroller of the Currency (OCC). Thereport showed delinquencies remainedelevated, but stable, during the thirdquarter of 2011, but have declined from2010’s totals. The report covers about62 percent of all first-lien mortgages inthe United States, worth $5.6 trillion inoutstanding balances.

The number of new foreclosuresincreased by 21.1 percent during Q3, asservicers lifted voluntary moratoriaimplemented in late 2010 and exhaust-ed alternatives to foreclosure for thelarge inventory of seriously delinquentmortgages working through the lossmitigation process. The increase in newforeclosures and the increase in averagetime required to complete foreclosuressales has resulted in the number offoreclosures in process increasing to 4.1percent of the overall portfolio, or1,327,077 loans, at the end of the thirdquarter of 2011.

At the end of Q3 of 2011, 88 percentof the 32.4 million loans in the portfo-lio were current and performing at theend of Q3, almost unchanged from the

previous quarter. The percentages ofmortgages that were 30 to 59 daysdelinquent and mortgages that wereseriously delinquent (loans 60 or moredays delinquent or delinquent mort-gages to bankrupt borrowers) did notchange from the previous quarter.However, both categories of delinquen-cies have declined from a year earlier.

Other findings of the study include:� On average, the modifications imple-

mented in the third quarter of 2011reduced borrowers’ monthly princi-pal and interest payments by 24.4percent, or $382. Modificationsmade under the Home AffordableModification Program (HAMP)reduced payments by 35.1 percenton average or $567.

� Loan modifications that reducedpayments by 10 percent or more per-formed better than those thatreduced payments by less. At the endof the third quarter of 2011, 58.8percent of modifications made sincethe beginning of 2008 that reducedpayments by 10 percent or morewere current and performing, com-pared with 36.4 percent of modifica-tions made during that time thatreduced payments by less than 10percent.

� Since the beginning of 2008, ser-vicers have modified 2,258,026mortgages through the end of thesecond quarter of 2011. At the end ofthe third quarter of 2011, 50.8 per-cent of those modificationsremained current or had been paidoff. Another 8.8 percent were 30 to59 days delinquent, and 17.8 per-cent were seriously delinquent.Eleven percent were in the process offoreclosure and 5.8 percent hadcompleted the foreclosure process.

Nevada Attorney GeneralFiles Deceptive PracticesSuit Against LPS

Nevada Attorney Gen-eral Catherine CortezMasto has filed a law-suit against Lender

Processing Services Inc. (LPS), DOCX LLC, LPSDefault Solutions Inc. and other sub-sidiaries of LPS (collectively known as “LPS”)for engaging in deceptive practices againstNevada consumers. The lawsuit, filed in the8th Judicial District of Nevada, follows anextensive investigation into LPS’ defaultservicing of residential mortgages inNevada, specifically loans in foreclosure.The lawsuit includes allegations of wide-spread document execution fraud, decep-tive statements made by LPS about effortsto correct document fraud, improper con-trol over foreclosure attorneys and the fore-closure process, misrepresentations aboutLPS’ fees and services, and evidence of anoverall press for speed and volume thatprevented the necessary and proper focuson accuracy and integrity in the foreclosureprocess.

“The robo-signing crisis in Nevada hasbeen fueled by two main problems: Chaosand speed,” said Attorney General Masto.“We will protect the integrity of the foreclo-sure process. This lawsuit is the next, logical

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step in holding the key players in the fore-closure fraud crisis accountable.”

The lawsuit alleges that LPS:� Engaged in a pattern and practice of

falsifying, forging and/or fraudulent-ly executing foreclosure related doc-uments, resulting in countless fore-closures that were predicated upondeficient documentation;

� Required employees to executeand/or notarize up to 4,000 foreclo-sure related documents every day;

� Fraudulently notarized documentswithout ensuring that the notary didso in the presence of the personsigning the document;

� Implemented a widespread schemeto forge signatures on key docu-ments, to ensure that volume andspeed quotas were met;

� Concealed the scope and severity ofthe document execution fraud bymisrepresenting that the problemswere limited to clerical errors;

� Improperly directed and/or controlledthe work of foreclosure attorneys byimposing inappropriate and arbitrarydeadlines that forced attorneys tochurn through foreclosures at a ratethat sacrificed accuracy for speed;

� Improperly obstructed communica-tion between foreclosure attorneysand their clients; and

� Demanded a kickback/referral feefrom foreclosure firms for each casereferred to the firm by LPS andallowed this fee to be misrepresent-ed as “attorney’s fees” on invoicespassed on to Nevada consumersand/or submitted to Nevada courts.LPS’ misconduct was confirmed

through testimony of former employees,interviews of servicers and other industryplayers, and extensive review of more thanone million pages of relevant documents.Former employees and industry playersdescribe LPS as an assembly-line sweat-shop, churning out documents and fore-closures as fast as new requests came inand punishing network attorneys whofailed to keep up the pace.

“LPS has cooperated with the AttorneyGeneral’s office for more than 14 months toresolve its inquiry in a manner which wouldbenefit the citizens of Nevada,” read a state-ment from LPS. “Unfortunately, the compa-ny’s efforts to engage in meaningful discus-sions with the Nevada Attorney General’soffice have been frustrated by the NevadaAttorney General’s decision to outsource itsinvestigation to Cohen Milstein Sellers & TollPLLC, a plaintiff’s law firm located inWashington, D.C., in apparent violation ofNevada law. The complaint highlights mis-conceptions about LPS and seeks to sensa-tionalize a variety of false allegations in amisleading manner. LPS will vigorouslydefend against the complaint filed by theNevada Attorney General.”

New Jersey Tops in U.S.With an AverageDownpayment of 13.76 Percent

With the housingmarket continu-ing to struggle andfewer consumers

being able to purchase a new home orapartment, LendingTree.com has releaseddata highlighting the average downpay-ments on residential real estate purchasesfor all 50 states and Washington, D.C. Thestudy finds that New Jersey leads the coun-try with the highest average downpaymentof 13.76 percent. The state with the lowestaverage downpayment is North Dakota,where buyers put down an average of11.37 percent when purchasing a home.

The locations rounding out the top fivefor highest downpayments includingWashington, D.C. (13.54 percent), New York(13.51 percent), Hawaii (13.37 percent) andCalifornia (13.25 percent). The states com-pleting the bottom five are Wyoming (11.42percent), Oklahoma (11.67 percent), Utah(11.75 percent) and Tennessee (11.75 per-cent). Overall, the average downpaymentfor all states is 12.29 percent.

“If Federal regulators were to adopt theproposed 20 percent downpaymentrequirement, a majority of borrowerswouldn’t be able to meet the standard giventhe findings in this report,” said Doug Lebda,founder and chief executive officer ofLendingTree. “The proposed rule is part of alarger set of requirements that wouldexempt qualified borrowers from risk reten-tion requirements and would have access tothe lowest rates available. While this rule hasyet to be put into effect, borrowers shouldbe aware of the possibility and plan forfuture home loan needs. By utilizingLendingTree, borrowers can find the lowestrates available, find the best deal, anddecrease monthly payments to make thedream of owning a home a reality.”

Additional findings from theLendingTree data include:� New Jersey, a state with a loan-to-

value (LTV) ratio lower than thenational average, also has a higheraverage home price than most otherstates. However, New Jersey falls intothe higher end of the spectrum interms of average debt-to-income(DTI) ratios.

� Nevada, a state that has had highforeclosure rates and sharp decreasein the numbers of homes purchased,actually ranks as the state with theninth highest average downpaymentat 13.05 percent.

� The state with the most closings todate in 2011 is Texas, with 39,498(through October 2011). SouthDakota has the fewest closings thisyear with only 807.

Total Loan Mods for 2011 Nearing the One Million Mark

HOPE NOW has releasedits October 2011 datashowing that perma-nent loan modifications

totaled almost 80,000 for the month,bringing the total for the year to approxi-mately 885,000. Included in the data is thecontinuing trend that the majority of pro-prietary loan modifications have lowermonthly principal and interest paymentsand fixed interest rates of more than fiveyears. Additionally, October’s data showeddeclines in 60-plus days delinquent loansand foreclosure sales.

“Last month, the industry hit a sig-nificant milestone with five millioncompleted loan modifications since2007. With almost a million loanmods completed this year, it is clearthat the industry and its partners con-tinue to invest a tremendous amountof resources into assisting homeown-ers across the country,” said FaithSchwartz, HOPE NOW executive direc-tor. “Mortgage servicers, non-profithousing counselors and the govern-ment continue to incorporate innova-tive ways to reach families strugglingwith their mortgages and each monthwe see the results of these collabora-tive efforts.”

Since HOPE NOW began reportingdata in 2007, the mortgage industryhas completed 5.05 million loan mod-ifications for homeowners. Thisincludes approximately 4.17 millionproprietary modifications and883,076 completed under the HomeAffordable Modification Program(HAMP). For the month of October,more than 53,000 loan modificationswere proprietary and 26,102 wereHAMP modifications.

According to the survey data, theinventory of 60-day plus delinquen-cies is 2.65 million for October 2011,down from the 2.81 million reportedin September. Completed foreclosuresales for October 2011 decreased fromthe previous month—64,000 com-pared to 68,000. Foreclosure startsincreased by seven percent for themonth—209,000 compared to196,000.

Massachusetts AG CoakleyTargets Five Major Banksfor Illegal Foreclosureand Servicing Practices

M a s s a c h u s e t t sAttorney GeneralMartha Coakleyhas filed a lawsuit

in Suffolk Superior Court against fivenational banks, Bank of America,Wells Fargo, JP Morgan Chase, Citi andGMAC Mortgagein connection withtheir roles in allegedly pursuing ille-gal foreclosures on properties inMassachusetts, as well as deceptiveloan servicing. The suit also namesMortgage Electronic RegistrationSystem Inc. (MERS) and its parent,MERSCORP Inc., as defendants.

“The single most important thingwe can do to return to a healthy econ-omy is to address this foreclosure cri-sis,” said AG Coakley. “Our suit allegesthat the banks have charted a destruc-tive path by cutting corners and rush-ing to foreclose on homeowners with-out following the rule of law. Ouraction today seeks real accountabilityfor the banks illegal behavior and realrelief for homeowners.”

In the complaint, AG Coakley allegesthese five entities engaged in unfair anddeceptive trade practices in violation ofMassachusetts’ law by:� Pervasive use of fraudulent docu-

mentation in the foreclosure process,including so-called “robo-signing;”

� Foreclosing without holding the actualmortgage (“Ibanez” violations);

� Corrupting Massachusetts’ landrecording system through the use ofMERS; and

� Failing to uphold loan modificationpromises to Massachusetts home-owners.According to the complaint, the

banks used false documentation inthe foreclosure process, includingrobo-signing, whereby bank person-nel signed affidavits that wereuntrue, or not based on the signor’sactual knowledge. An entity wishingto foreclose on a property mustdemonstrate it has filed an affidavitin compliance with Massachusettslaw.

The suit also alleges that the fiveentities participated in unlawful fore-closures when they commenced fore-closures on mortgages where theywere not the holders of those mort-gages. The Supreme Judicial Court(SJC), in Commonwealth v. Ibanez,recently upheld Massachusetts lawand stated that “only the presentholder of a mortgage is authorized toforeclose on the mortgaged proper-ty.” The complaint alleges that theseentities ignored this fundamentallegal mandate and proceeded toforeclosure even though they did nothold the mortgage, and thus had nolegal authority to conduct the fore-closure. The banks’ failure to obtaina valid assignment of the mortgageprior to foreclosure has adverselyimpacted titles to hundreds, if notthousands, of properties in theCommonwealth. The complaintalleges that the banks falselyclaimed to be the holder of a mort-gage in several foreclosure docu-ments even though they failed toobtain a valid assignment of themortgage.

The complaint also alleges thatthese banks have undermined ourpublic land record system throughthe use of MERS, a private electronicregistry system. According to thecomplaint, the creation and use ofMERS was adopted by these defen-dants primarily to avoid land regis-tration and recording requirements,including payment of recording andregistration fees, and to facilitatesales of mortgage loans. The use ofMERS has resulted in a lack of trans-parency as to the entities that havethe legal authority to enforce mort-gages, and unfairly conceals fromborrowers the true identity of theholder of the debt. Since 1997, morethan 63 million home loans havebeen registered on the MERS System,accounting for more than 60 percentof all newly-originated mortgageloans. The complaint also allegesthat through the use of the MERS sys-tem, the banks unlawfully failed toregister assignments of mortgagesand transfers of the beneficial inter-ests in mortgages.


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Mortgage Professionals to Watch� James E. Iley Jr. has been named

senior vice president, national pro-duction manager of SupremeLending.

� James Cromartie has joined FirstGuaranty Mortgage Corporation asassistant vice president of busi-ness development, national retailproduction.

� Sara W. Stephens, MAI has beenelected 2012 president of theAppraisal Institute. Joining Stephenson the Appraisal Institute’s board for2012 are President-Elect Richard L.Borges II, MAI, SRA; Vice PresidentKen P. Wilson, MAI, SRA; ImmediatePast President Joseph C. Magdziarz,MAI, SRA; and Chief Executive OfficerFrederick H. Grubbe, CAE.

� U.S. Attorney Eric Holder has namedMichael J. Bresnick as executivedirector of the Financial FraudEnforcement Task Force.

� Stewart Information Services hasannounced a new executive teamconsisting of Glenn Clemente asgroup president, direct operations;George Houghton as group presi-dent, agency operations; JasonNadeau as group president, mort-gage and title services; Mike Skalkaas group president, internationaltitle operations and chief legal offi-cer; Allen Berryman as chief finan-cial officer; Murshid Khan as chiefinformation officer; and JohnArcidiacono as senior vice presidentof marketing.

� Rob Pommier has been named vice

president of business developmentfor Genpact Limited’s Quantummortgage technology platform.

� Urban Lending Solutions hasnamed T.J. Lewis Jr. as corporatediversity and business develop-ment executive.

� Prudential Mortgage CapitalCompany has announced that BrianSalyards has joined its multifamilyoriginations team.

� DataQuick has announced theaddition of Frank O’Neill Jr., SRA asthe company’s chief appraiser.

� Shore Financial Services Inc., par-ent company of United WholesaleMortgage (UWM), has hired PaulOrlando as the firm’s new chiefinformation officer and has namedBill Van Nort to the position ofchief technology officer.

� Ben Itkin has joined MortgageCapital Trading Inc. as senior tradedesk executive.

� Paul Leonard has been promoted tothe position of senior vice presidentof government affairs for theHousing Policy Council of theFinancial Services Roundtable.

� WFG National Title InsuranceCompany has appointed MichaelKelly Esq. as its new vice president,state counsel for its New York agencyoffice.

Your turnNational Mortgage ProfessionalMagazine invites its readers to submitany information, events, passages, pro-motions, personal or professionaloccurrences that seem appropriateand/or other pertinent data to theattention of:

Heard on theStreet/Mortgage

Professionals to Watchcolumn

Phone #: (516) 409-5555E-mail:

[email protected]

Note: Submissions sent via e-mail arepreferred. The deadline for submissionsis the 1st of the month prior to the tar-get issue.

heard on the street continued from page 11

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Credit Repair Partnerships Still aThreat to Your Mortgage Business

And Your State May Take the ActionAgainst You!

By Terry W. Clemans

In the spring of 2010,I wrote a columnwarning mortgageoriginators that asso-ciating with creditrepair firms could jeop-

ardize their career. Well, it’s been almosttwo years since that was written, and I amsaddened to feel the need to revisit thisissue as the treat is still out there despiteincreased legal action to stop it.

I the past few months, the AttorneysGeneral (AGs) from Colorado, Arkansasand Indiana have all either filed suits orhave settled suits against credit repairfirms. These state AGs join the FederalTrade Commission (FTC) and AGs inMassachusetts, Illinois, Pennsylvania,California, North Carolina and WestVirginia who have taken action againstcredit repair firms in recent years for avariety of actions claimed to be illegalunder various state and federal laws.

The most recent case on Nov. 15,2011 (http://goo.gl/joebT) settled byColorado AG John Suthers againstVeracity Credit Consultants LLC, aDenver-based company, bars the com-pany from charging upfront fees inexchange for credit repair services aswell as misleading consumers abouttheir abilities to cleanse consumers’credit reports. Under the terms of theagreement, Veracity Credit Consultantsmust pay the state $400,000 in restitu-tion, costs and fees.

Veracity, according to the complaint,required that consumers pay an initialsetup fee of up to $99 and monthly feesof up to $79. Under both federal (CreditRepair Organization Act–CROA) andColorado law, a credit repair firm canonly charge fees once its services arecomplete. According to the Web site ofVeracity as of Jan. 1, 2012, they are stillcharging the same fees that got themsued. Many credit repair firms playsemantics with the law and claim thatthey are not “credit repair,” but “creditconsultants” or some other name to tryto avoid these laws. However, regard-less of what a company claims they are,the actions of their business will deter-mine what they are in the eyes of thecourts, should they be brought to onebased on the complaints of an aggra-vated consumer.

In Arkansas, the AG’s office sued aTexas firm that purports to repair a con-sumer’s damaged credit history, claim-ing its services are ineffective and anadvance fee it charges is prohibited byFederal law (http://goo.gl/Ackga). Anytime a firm wants to charge an upfrontfee for a credit consulting or repair serv-ice, warning flags should be flying high.

This suit, filed in U.S. District Court inLittle Rock against TRW Ventures LLC(who also operates under four companynames according to the complaint),seeks to bar the firm from engaging inthe practices alleged in the complaint.It also seeks restitution for affected con-sumers and the imposition of civilpenalties and attorneys’ fees. The suitsays the company claims to be able toremove all negative information from acustomer’s credit report, even thatwhich is accurate and not obsolete. Thisis another major warning flag for illegalactivity under CROA.

“Many consumers with bad creditsee offers of this kind as their last hopeto improve their financial situation …unfortunately; TRW readily takes themoney, but offers no real benefit,despite the sales pitch,” said ArkansasAG Dustin McDaniel.

And then, hitting closer to the mort-gage marketplace, the Indiana AG filedsuit against two credit repair and foreclo-sure consultant companies. Indiana AGGreg Zoeller brought suit against Florida-based Marucci Law Firm and Illinois-based E.A.C. Financial, claiming they wereillegally operating in Indiana when eachcompany entered into contracts with twolocal individuals, according to the filing(http://goo.gl/jjudb).

“Hoosier homeowners facing foreclo-sure or financial insecurity are often tar-gets for out-of-state organizations look-ing to make a profit off of their misfor-tunes,” AG Zoeller said. “This activity notonly preys upon some of our most vul-nerable citizens, but often places them infurther financial distress. The fact that alaw firm is involved is all the more disap-pointing to me.”

And don’t forget the treat writtenabout back in 2010, that your ability toaccess credit information for your mort-gage business can be lost due to associ-ation with credit repair companies. Thenational repositories each keep anindependent list of companies not tosell credit reports to, based on viola-tions of their policies. One of those poli-cies they strictly enforce is the ban onpartnerships with credit repair firms.

So the bottom line to all this … bevery careful when it comes to creditrepair companies soliciting referrals ofyour consumers. You don’t want to findyour name listed in one of these AG’spress releases or your company cut offfrom access to credit reports vital toyour mortgage originations.

Terry W. Clemans is executive director ofthe National Credit ReportingAssociation Inc. (NCRA). He may bereached at (630) 539-1525 or e-mail [email protected].

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StreetLinks LaunchesUSPAP-CompliantLiquidation ValuationReport for Servicers

StreetLinks Lend-er Solutions hasannounced the

launch of their new USPAP-compliantproduct StreetLinks LVR, a liquidationvaluation report for mortgage servicersand asset management firms. LVRs willbe performed by StreetLinks’ nation-wide panel of licensed appraisers usinga strict appraisal-like methodologybased on property condition, compara-bles and local market trends to providea thorough and objective analysis of theliquidation price around a strict 90-daymarketing window. This fast, accuratevaluation review is designed to deliverthe assurance servicers seek in theirappraisal values.

“Lenders use objective analysis tomake a financial decision when fundingloans—the same is used during servic-ing and default. A transaction’s ultimatefinancial decision requires an accurateand reliable value, which StreetLinksand the appraiser will stand behind,”said Ric Holder, director of StreetLinks’Mortgage Services Division. “StreetLinksLVR is a versatile servicing tool that canprovide relevant data to multiple sec-tors of the industry, from foreclosurebids to REO sales predictions and initialsales listing price. We’re excited to put amuch-needed sense of confidencebehind such appraisal values.”

Select StreetLinks clients havealready purchased LVR reports and havebeen impressed with the results.

“As StreetLinks promised, the LVR leftus more informed and more confidentin our ability to perform a financialanalysis of the collateral related to aseasoned mortgage loan portfolio,” saidJoe Huntzinger, vice president of lend-ing at the Indianapolis NeighborhoodHousing Partnership.

REMN Launches NewWholesale 203(k) ProductReal Estate Mortgage Network Inc.

(REMN) hasannounced the intro-duction of its

Wholesale FHA 203(k) RehabilitationProduct to remove the complexity outof the process for independent retaillenders across the country. This new

REMN wholesale product looks toimprove the 203(k) experience foreveryone involved by leveraging an in-house REMN team to manage theentire procedure. While there are anoverwhelming amount of distressedproperties on the market, manylenders do not offer FHA 203(k) prod-ucts because of the intricaciesinvolved. REMN assigns a dedicatedteam to handle the 203(k) loan’s post-closing management, home inspec-tion and other matters until the finaldraw is released.

“Today’s market offers massiveopportunities for 203(k) products,but they can be so complex that a lotof lenders just won’t offer them,”said Joe Amoroso, director of nation-al wholesale sales for REMN. “REMNwholesale has the experience with203(k) products and the commitmentto customer service to help inde-pendent brokers offer these loans ina way that simplifies the process forthe home buyer and the loan origina-tor. We recently had more than 1,200people register for our last FHA203(k) Webinar, further proof thatthe industry sees value in 203(k)products, but needs help gettingthem implemented. REMN has alwaysoffered industry leading support andour commitment to simplifying the203(k) process is one more way we’rehelping the independents on theground compete.”

REMN Wholesale’s 203(k) offeringsinclude both Streamlined 203(k) andFull Consultant 203(k) loans for usewith one- to four-unit residentialproperties in more than 30 states.These products allow for maximumloan-to-value (LTV) ratio of 96.5 per-cent on new home purchases and 97.5percent on refinances.

“Out of 1,200 registered for therecent REMN Webinar on 203(k) loans,only 113 were actively using this prod-uct,” said Andrew T. Berman, execu-tive vice president of NMP MediaCorp., publishers of National MortgageProfessional Magazine. “The primaryreasons cited why registrants were notusing the 203(k) product was due to alack of product knowledge and ashortage of lenders offering 203(k)programs.”


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For a free demo, contact Erik Wind, at (800) 262-3783, ext. 701 or visit

shortsalespeedway.com/freedemo

Why Is It Easy to Trap Real Estate Agents with ShortSaleSpeedway™?

Many real estate agents shy away from short sales because of the complexityinvolved in doing it themselves. When they refer the work to an attorney or thirdparty negotiator, they risk losing a great chunk of their commission.

ShortSaleSpeedway™ automates the short sale process, by creating all ofthe documents a real estate agent needs to create the superior short saleproposal exactly how banks want to see them.

How Can ShortSaleSpeedway™ Help YOU Trap Real Estate Agents?

Your company can have your very own, private labeled version ofShortSaleSpeedway™ that you offer at no cost to your real estate agents.They will now have the tools provided by your company to be a true short salesspecialist. Now they can negotiate short sales with ease and not have to giveaway their commission to someone else. You’re providing them with a tool thatputs more money in their pocket.

What Do We Provide You?When you have your own ShortSaleSpeedway™, we provide you with the

following:Your own customized private labeled ShortSaleSpeedway™ siteAccess to reporting on all borrowers being put into the systemTraining for you, your real estate agents and a dedicated support teamMarketing materials to promote your ShortSaleSpeedway™ to real estateagentsIn many cases, the setup for the private labeled site costs you nothing!

new to market continued from page 29

QMS to Begin OfferingThird-Party MERS Audits

Quality Mortgage ServicesLLC (QMS) has announcedthat the company is nowoffering third-party Mort-gage Electronic Registra-tion Systems Inc. (MERS)

audits as required by MERS TrainingBulletin No. 2011-03, dated July 1,2011. The bulletin requiresIndependent Annual Attestation byDec. 31, 2011, which may be per-formed by an independent controlfunction within the organization. Itmust be provided by an independentauditor outside of the company after2011. The rule impacts all servicersand sub-servicers.

MERS tracks servicing rights for loansregistered on the MERS System. MERSacts as the mortgagee of record in thepublic land records and as nominee forthe lender and its successors andassigns.

“MERS is taking steps to make it eas-ier for the industry to operate in a man-ner that has worked well in the past,”said Tommy A. Duncan, CMT, presidentof QMS. “In order to comply withupcoming requirements, independentthird-party auditors will be needed toprovide audit services to support annualattestations for servicers and sub-servicers.The QMS audit compares the informa-tion contained in MERS to the servicingsystem. In addition to the system com-parison, QMS will review the note andsecurity instrument and if applicable,the assignment, release of mortgage,modification or subordination agree-ment to ensure that the document hasbeen prepared correctly and that theinformation reported to MERS is accu-rate. Quality Mortgage Services is proudto offer the industry our services in thisarea.”

United WholesaleMortgage Unveils NewJumbo Product

United WholesaleMortgage (UWM)has announcedthat it has

launched a unique jumbo product withloan amounts up to $2.5 million andloan-to-value (LTV) ratios up to 80 per-cent. This product is exclusive and hasextremely competitive low fixed ratesin the mid four percent range, alongwith multiple adjustable-rate mortgage(ARM) options if the borrowers choose.

“Investors have been slow toembrace the return of jumbo loansover the past year as a result of the riskfactor,” said Mat Ishbia, president ofUnited Wholesale Mortgage. “We areone of the few lenders in the countrythat have the capability to underwrite,close and fund jumbo loans all underone roof. UWM has the ability to offerthis program based on its exceptional

reputation of originating the highestquality loans across the country.”

UWM has dubbed the product “TheBig and Easy” due to the size of theloan it can fund coupled with thestraightforward, trouble-free processthat UWM has established. UWMoffers brokers a number of differenttools to make them more successful.Among them are EASE (EasiestApplication System Ever), its brokerportal, and Easy Qualifier (EQ), itsproduct and pricing engine. Further,the accessibility to UWM’s customerservice staff and quick underwritingturn times attracts top tier brokerswho produce high volumes of qualityloans. The Big and Easy can be pricedand underwritten using EASE and EQ.

“Our quality of business is a directresult of our account executives work-ing only with brokers that haveproven to originate quality loans andour centralized team of underwritersensuring that these loans will per-form,” said Ishbia.

The Big and Easy offers a variety offinancing options that include a 30-year fixed, 15-year fixed, 10-year ARMand also a five-year ARM. This pro-gram accepts FICO scores as low as720. Eligible property types for TheBig and Easy include primary resi-dences, second homes, condomini-ums, PUDs (planned unit develop-ments) and double units. Officials atUWM say it is the only true jumboloan in the country that originatorscan close in two weeks or less andthey expect UWMs volume to rise sig-nificantly within the next year.

New LPS Offering Further Protects Military Personnel From Foreclosure

Lender ProcessingServices Inc. (LPS)has announcedadded functionali-ty in its Military

Service Personnel (MSP) loan servicingplatform that will help servicers bettertrack and manage loans belonging tomilitary service members. LPS devel-oped its Military Service Relief (MSR)functionality within MSP, which addsadditional stop-gap measures to helpservicers further identify and processprotected loans with greater ease andconfidence.

The Servicemembers Civil Relief Act(SCRA) prohibits mortgage servicersfrom foreclosing or seizing propertyfrom active-duty military personnelunable to meet their mortgage obliga-tions. The protection from foreclosurelasts up to nine months after activeduty has ended, and service membersalso qualify for interest rate limits andother shields under the law.

“Due to the current mortgage envi-ronment, LPS saw a widespread need to

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add additional holds and stop-gapmeasures to help servicers identifyloans belonging to our nation’s mili-tary personnel,” said LPS ChiefInformation Officer Joseph Nackashi.“The expanded functionality can cap-ture and store information about aborrower’s active duty status, whileother unique identifiers detect SCRA-eligibility to ensure fees are notassessed or collected in error and thatpayoff interest is calculated using thecorrect SCRA rate limits.”

The MSR functionality delivers 30more loan-level fields in MSP, thetechnology used to service approxi-mately half of the nation’s mortgageloans by dollar volume. With theseexpanded capabilities, servicers canbetter manage loans for active-dutymilitary personnel. Future MSRenhancements will deliver greaterfunctionality related to default andcredit bureau reporting, as well asreconciliation of advances.

PriceMyLoan UnveilsLendingQB Cloud-BasedPlatform

Automatedunderwritingand loan pric-

ing technology provider PriceMyLoanhas released LendingQB, a 100 percentWeb-based mortgage lending platform.

“With LendingQB, we believe we aredoing more than just providing a ‘cloudcomputing’ loan origination system,”said Binh Dang, LendingQB’s managingpartner. “We believe we are fundamen-tally changing the way that lenders usetechnology.”

Since 2004, PriceMyLoan has beenproviding lenders with advanced tech-nology to automate the underwritingand pricing of their loans. Over the pastseven years, PriceMyLoan has had theunique opportunity to work closelywith their clients and carefully observetheir utilization of technology.

“Each one of our clients had a valu-able LOS story to tell us,” said GigiCampbell, national sales director forLendingQB. “What became evident istheir desire for a ‘one-stop shop’ lend-ing system, and a system that wouldadapt to the way they work.”

To that end, LendingQB was builtto include a comprehensive list offeatures, such as electronic docu-ments with e-signatures; a full com-plement of tools for loan processing,underwriting, secondary marketing,closing and post-closing; and special-ized tools for wholesale and retailenvironments, such as broker Website portals and online consumer loanapplications. Naturally, PriceMyLoanpowers the automated underwritingand loan pricing aspects of theLendingQB platform.

ClosingCorp AnnouncesEnhancements toSmartGFE Calculator

ClosingCorp hasannounced newenhancements to

its SmartGFE Calculator. The tool nowprovides discounted refinance (reis-sue) rates and conditional fees, andfeatures single sign-on capabilities,improving the convenience of theapplication by only requiring users toenter one log-in to access the calcula-tor when it is embedded within asecured, third-party Web site. TheSmartGFE Calculator only requiresanswers to questions that are criticalto calculating accurate discountedrefinance rates for each title company.

“When embedded onto secure Websites, single sign-on makes using thetool incredibly convenient, as usersonly have to log onto the systemonce,” said Tim Armbruster, chieftechnology officer for ClosingCorp.“We are not only committed to seek-ing customer input regarding ourproducts, but are also truly dedicatedto acting on those recommendationsand enhancing our offerings. The abil-ity to generate discounted refinancerates and conditional fees based on aspecific location are two features thatare critical to our clients’ businesses,and we continually strive to ensurethat our products deliver the function-ality mortgage professionals needtoday.”

By also including conditional fees,the calculator now allows title agen-cies with several locations to managethe multiple fee structures and deliveraccurate rates based on county, regionor zone.

“We make every effort to create thebest user experience possible with all ofour products, which is the reason forcontinuously improving capabilities andadding features such as single sign-on,”said Bob Hart, vice president of sales forClosingCorp. “By taking the time toidentify only those questions that arerelevant to delivering accurate discount-ed refinance rates and conditional fees,we ensure that busy loan officers andtitle professionals are not burdenedwith answering any unnecessary ques-tions. Through these extra steps theSmartGFE Calculator gives title compa-nies the most user-friendly, precise wayto deliver title and settlement rates,recording fees and transfer taxes totheir lender clients.”

Zillow MortgageMarketplace Debuts onAOL Real Estate andDailyFinance

Zillow Inc. hasa n n o u n c e dthe launch of

the Zillow Mortgage Marketplace shop-ping experience on AOL Real Estate andDailyFinance, providing tools toresearch, shop for and compare mort-gages. AOL Real Estate and DailyFinancevisitors now have easy access to impor-tant home financial information, suchas mortgage calculators, real-time mort-gage rates, and Zillow’s innovative mort-gage shopping experience, which allowsusers to compare personalized loan


By Drew Waterhouse

The mortgage industryis on the verge of anew chapter, charac-terized by lower over-all production vol-umes relative to years

past, greater compliance burdens andlower product-based differentiationamong participants. However, lost inthis seemingly depressing news are theseeds of real opportunity for firms andindividual originators well-suited to thenew environment. A much smaller poolof players has created a need to achievegreater production with fewer originators.

No, that is not a contradiction—due tothe shrinking of the mortgage

industry, the loans closedper originator figures

are actually head-ed higher. This

reality hasput origi-

nators with a documentable track recordof strong production in great demand.Could this be the time for you to considera move to a mortgage lender in which youare better model-matched?

Model-matching is the process ofimproving the mutual results from rela-tionships between lenders and origina-tors. It is a comprehensive process ofassessment of both parties across a widerange of factors, including leadership, cul-ture, business type, operations and tech-nology. This process involves due dili-gence and consideration of both objectiveand subjective factors of a relationship inorder to produce a holistic picture of pos-itive-matched and negative-matchedareas within the relationship. Leadershipand culture are among the most impor-tant, yet difficult, business relationshipcomponents to evaluate. However, let’stake a look at how they can be evaluated.

LeadershipFor high-achieving organizations and pro-fessionals, it is vital that engagementbetween managers and producers be con-ducted in a clear, concise and consistentway. The study of leadership clearlydemonstrates that talent (producers andother creative employees) appreciate clar-ity of vision, a voice in, and an impact onthe business processes and freedom toreasonably adapt to their unique circum-stances or style (empowerment). Wherethis environment exists, organizationaland individual goals are achieved, cultureis seen and morale is high. Questions to beconsidered include:

Vision� Can you restate, without prompting

or referring to notes, the vision andkey strategies of your currentemployer?

� Do you believe that the visionexpressed by your current employeris a prudent one given your under-standing of the mortgage industryand market currently?

Voice� Does your current employer actively

seek input from you and othersthroughout the organization before,during and after implementation ofa new project, process or product?

� Do you feel that you can voluntarilyshare your opinion on matters ofconcern to you without fear ofridicule or retaliation?

Empowerment� Can you point to specific initiatives

or changes in policies or processes atyour current employer that aredirectly attributable to employeesuggestions or recommendations?

� Has the firm been reasonably accom-modating to you with regard tominor variations from company poli-cies or protocols as it relates to theunique features of your business?

Leadership can be a subjective qual-ity to evaluate in corporate America.Yet, there are fundamental questionsrelated to a company’s stated vision,proactivity in seeking input fromemployees and responsiveness to indi-vidual employee needs that can help toassess whether your current company’sleadership is a positive or negativemodel-match for your business.

CultureThe culture of a business is mostassuredly influenced by the leadershipfactor we have just examined. But cul-ture goes well beyond the direct influ-ence of managers from above—it con-siders the values displayed within theorganization. Values comprise a widerange of factors including:

1. Compensation, benefits and recog-nition;

2. Development and growth;3. Job characteristics;4. Organizational character and repu-

tation and;5. Relationships.

A true, positive model-match canonly occur when you, the originator,are aligned with your organizationacross the full range of these values.Questions that can help to illuminatethis alignment or lack thereof include:

Compensation, benefits and recognition� In light of the recent compensation-

related regulatory changes in themortgage industry is your employ-er’s compensation program compet-itive, clear and compliant?

� In your market, how does your com-pensation package compare to yourpeers?

� Is your employer’s benefit packagecompetitive and sufficient for sup-porting your career, family andretirement goals?

� Are employees at your current com-


Leadership and culture are the first of the corebusiness factors anymortgage originatorshould evaluatewhen determiningthe company withwhich they have the best model-match.

“

”

Leadership and Culture:Are You Model-Matched With Your Current

Mortgage Lender?

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response to the anticipated increase inrefinance activity from HARP Phase II.With interest rates at an all-time low inthe four percent range, and an estimat-ed one million eligible homeownersunder the government expanded HomeAffordable Refinance Program (HARP),lenders are in a great position to proac-tively treat existing customers as newleads, showing they have their bestinterest at hand. In this environment,effective lead management is critical tocapture, nurture and track these impor-tant sales opportunities.

“HARP 2.0 offers a great opportunityfor LSI Mortgage Plus to continue tobuild trust as a go-to lender for our cus-tomers,” said Brigitte Marshall, directorof marketing at LSI Mortgage Plus.

“Leads360 is critical to our HARP 2.0campaign, allowing us to set up specif-ic campaign workflows, including nur-turing efforts, customized distributionand more, to effectively market to exist-ing customers.”

Leads360 HARP 2.0 Toolkit empowerlenders with three main tools: Datamining of their Leads360 database toidentify qualified borrowers; pre-salenurture efforts with direct mail trackingand email nurturing campaigns andsales process workflow to aggressivelytrack opportunities through to the closeof the mortgage.

“HARP 2.0 will generate a welcomespike for the mortgage industry, and it’s


quotes and lender reviews, and connectdirectly with lenders.

Home and mortgage shoppers canfind the Zillow Mortgage Marketplaceshopping experience on AOL by visiting:the AOL Real Estate home page; theAOL Real Estate listing pages; or theAOL Real Estate home finance center.

“We planned to launch this integra-tion next year, but as mortgage ratesremain at historic lows consumers areclamoring for quick and useful mort-gage information. In less than twomonths, Zillow and AOL’s developmentteams worked closely together tolaunch Zillow Mortgage Marketplace onAOL Real Estate and DailyFinance,” saidSpencer Rascoff, Zillow chief executiveofficer. “Expanding Zillow MortgageMarketplace to AOL is an importantmilestone, and will expose our uniquemortgage offering to many more mil-lions of mortgage shoppers.”

In October, AOL and Zillowannounced the partnership to add theZillow Mortgage Marketplace shoppingexperience on AOL Real Estate andDailyFinance in 2012.

“Our goal is to provide a suite of bestin class financial tools and resources tosupport our users as they make person-al finance and real estate decisionsthrough their life stages,” said JayKirsch, senior vice president and gener-al manager of the AOL Marketplace.“We are thrilled to have Zillow join ourteam of outstanding partners.Collectively, we are bringing the best ofthe Web to our AOL users in one com-prehensive online destination.”

Aklero Unveils New MERS Data and DocValidation Module

Aklero Risk Analytics Inc.has announced therelease of DQx for MERSData and DocumentValidation Module.

The module is part of Q-Close, Aklero’sLoan Quality Management Platform,and provides an automated method tovalidate the accuracy of data residentin the MERS Electronic Registry.

“We developed this offering inresponse to the requirements outlinedin the MERS Quality AssuranceProcedures issued in September requir-ing servicers to validate the accuracy ofthe data held on the MERS’ systemagainst source documents,” saidRichard J. Downing, executive vice pres-ident of sales for Aklero.

As a result, lenders are required toattest that they have performed athree-way document to data validation,including comparing the data on theMERS system against the bank’s dataand against the “true data,” or originaldocuments, a process that ensures ahigh degree of accuracy. That approachenables Aklero to review the docu-ments and identify discrepancies. For

servicers, the benefit of using this mod-ule is that Aklero can validate thou-sands of loans overnight, while in thesame amount of time, servicers thatcling to expensive manual processescomplete far fewer loans files.

Leads360 Releases New Refi Product for HARP Phase II

Leads360 has announced the release ofthe Leads360 HARP 2.0 Toolkit in continued on page 34

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Think about it. How do you becomea manager or owner in this industry?Usually like me.

1. You become a loan officer withoutany training. Usually because youknow someone in this industrybecause most companies don’t wantto train rookies. If I had knocked onthe door of 10 mortgage companies30 years ago, none of them wouldhave hired me.

2. You become a top producer.Perhaps you are more competitive,a harder worker or just fall into theright situation. I think for me it wasthe right situation being “inside” areal estate office.

3. You are then promoted to manager.Or, you start your own companybecause you get little guidance orsupport from your present manager.

There you are—a good producer. Youare probably missing a few fundamentalsof production. Now you must teach othersto do what you do. And here is the prob-lem—you are still producing. Now you

must produce, recruit, hire, train, coach,administer, fight fires and more. If I countall of these, it would be at least five full-time jobs. Think you can do any of themwell? Most producing managers make 70percent of their income from personalproduction. Therefore, where are yougoing to spend most of your time? Forthose not good in math, that leaves 30percent or less on the other four jobs.

And you wonder why I felt that man-agement training was important? Andthat is why I have teamed with NationalMortgage Professional Magazine to deliv-er a column on leadership for mortgagemanagers. That is also why I ask that I notset the agenda each month. It has to bewhat is important to you. E-mail me [email protected] and let meknow what you are would like to see inthis column.

Dave Hershman is a top author in themortgage industry with seven books pub-lished, as well as hundreds of articles.Dave has delivered hundreds of keynotespeeches, seminars and schools for theindustry as well. He may be reached bye-mail at [email protected] orvisit OriginationPro.com.

for managers only continued from page 18


one that lenders cannot afford to miss outon,” said Nick Hedges, president and CEO atLeads360. “The past few years have been achallenge for the mortgage industry withforeclosures at an all-time high, lower loanorigination volumes and a heavily regulat-ed default space. HARP revisions, combinedwith lower interest rates, have the potentialto drive a much needed boost for the mort-gage industry and the economy.”

ACI Releases New UCDP-CompliantAppraisal Reader Tool

ACI has announcedthe release of a newAppraisal Readerpowered by Apprais-al.com. The new

technology helps lenders and reviewersview and validate appraisal reports pre-pared by any appraisal software vendorthat supports the new MISMO XML format.Appraisal.com is an ACI brand that servesthe appraiser and lender communities.The Appraisal Reader is compact and pro-vides mortgage professionals with a criticaltool to conduct a review while keeping allthe components of the appraisal reportintact. The review is performed using ACI’sPAR Logic rules, a comprehensive librarythat checks the appraisal report for com-pliance. Custom client-specific rules canalso be applied on demand using PARLogic to highlight errors and omissions.

The Uniform Appraisal Dataset (UAD)

information embedded in the PDF apprais-al report is also available in a concise,organized manner using the QuickViewSummary Report within the AppraisalReader. The QuickView Summary Reportpresents the UAD information in a formand helps streamline the review and vali-dation process prior to submission to theUniform Collateral Data Portal (UCDP).

“With the advent of the UCDP, ensuringregulatory compliance before submittingappraisal reports to the portal is increas-ingly important for lenders and apprais-ers,” said Dave Roberts, president of ACI.“We’ve developed a sophisticated, yet free,solution that enables lenders, creditunions, and community banks to easilyview and validate MISMO XML appraisalreports using Appraisal.com technology.”

Your turnNational Mortgage Professional Magazineinvites you to submit any information pro-moting new “niche” loan programs, newproducts or any other announcementrelated to the introduction of a new pro-gram, to the attention of:

New to Market columnPhone #: (516) 409-5555

E-mail:[email protected]

Note: Submissions sent via e-mail are pre-ferred. The deadline for submissions is the1st of the month prior to the target issue.

Finally, the complaint alleges thebanks deceived and misrepresentedto borrowers the process, require-ments, and availability of loan modi-fications. The banks publicallyclaimed to be engaged in widespreadloan modifications aimed at preserv-ing home ownership and avoidingunnecessary foreclosures. Through theNational Homeownership RetentionProgram, which commenced on Nov. 6,2008, these banks represented that theywould work with borrowers to helpthem avoid unnecessary foreclosures byreducing monthly mortgage paymentsto affordable and sustainable levels.The complaint alleges these banks mis-led borrowers about their eligibility forthis program and the amount of reliefavailable, failed to achieve a significantlevel of modifications, and often strungalong borrowers for months in trialmodifications that were ultimatelyrejected.

The AG’s lawsuit seeks civil penalties,restitution for harm to borrowers andcompensation for registration fees that

were avoided. The lawsuit also seeks tohold the banks accountable throughpermanent injunctive relief to providea solution for prior unlawful foreclo-sures and to require that the banks,going forward, register assignments andother documents in accordance withMassachusetts law.

Your turnNational Mortgage ProfessionalMagazine invites you to submit anyinformation on regulatory changes, leg-islative updates, human interest storiesor any other newsworthy items pertain-ing to the mortgage industry to theattention of:

NMP News Flash columnPhone #: (516) 409-5555

E-mail:[email protected]

Note: Submissions sent via e-mail arepreferred. The deadline for submissionsis the 1st of the month prior to the targetissue.


pany recognized for achievements inways that go beyond basic salesincentive contests?

Development and growth� Are you given the opportunity and

encouragement/support by your cur-rent employer to seek training thatgoes beyond continuing education?

� Do you have access to internal train-ing relative to business planning,professional development, products,technology and marketing?

� Are there key leaders and managersthat take a vested interest in coach-ing and accountablilty with you?

Job characteristics� Are you given sufficient autonomy and

independence by your current employer?� Does your company provide you with

leadership opportunities?� Would you consider your current

position to be conducive for properwork/life balance?

Organizational character and reputation� Are you proud to work for your cur-

rent employer?� Does the reputation of your employer

create value for you in your market withyour business partners and cllients?

� Does your current employer engagein community service or industryleadership initiatives?

Relationships� Do the relationships you have with

fellow employees at your currentorganization ...� Do you have relationships with

fellow employees and teammembers or is it transactional?

� Is it an environment where you areable to share and benefit from hav-ing relationships that can tangiblyenhance your productivity and longterm objectives?

� Do you enjoy being in the officeand work environment or is itsomething you would ratheravoid?

The culture of an organization canalso be hard to quantify, but it is neces-sary to do so if a true assessment ofyour current situation can be accom-plished and then compared to otheropportunities in the marketplace.

Leadership and culture are the first ofthe core business factors any mortgageoriginator should evaluate when deter-mining the company with which they havethe best model-match. Honestly answeringthe questions poised above can prepareyou to “build where you stand” or to figu-ratively “Go West, young man (or woman)”in search of better opportunities.

Drew Waterhouse is managing directorof Hammerhouse LLC, a national recruit-ing and strategic growth firm for thefinancial services industry with mortgagesales and leadership placement at its core.Drew may be reached by e-mail [email protected] or visit TeamHammerhouse.com.

leadership and culture continued from page 32

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MakeReal Estate Agents

Your Soldiers!

B Y R A Y M O N D B A R T R E A U

The age-long question of, “the best way to gain and keep relationships withreal estate agents” is becoming more obvious … you must give them businessto get their business. Of course it isn’t as simple as it sounds. It takes strategicplanning, research and the right relationships to help you achieve this goal.

First, you must determine who you want to work with. A few suggestionswould be looking for the real estate agents with the most listings. Or, who isthe most aggressive buyer agents in your market. My advice would be to tar-get two or three new real estate partners to work with and send business to.

Once you have your target list of new partners, you now must gain asource of business for them. There are many ways you can do this and loweryou overall cost per acquisition. One of the easiest ways with an almostimmediate return on your investment is providing homebuyer leads to high-producing buyers’ agents/brokers. Real estate agents are in desperate needof leads, and when they have a strategic partner providing them leads, theyare guaranteed to send you all their loan business.

Make the real estate agents your soldiers, your army on the frontline. Aswe know, getting a hold of any lead is the first major battle. By sharing home-buyer leads with a real estate agent, you are doubling your chances of con-tacting the individual to pre-qualify them for a loan. This is another battlewithin itself as you always have to make sure that your real estate partnersare calling the leads multiple times a week until they get a hold of them.

I have spent the last six months putting together a business model to tar-get real estate agents using our traditional marketing methods as our corevalue to the real estate industry. If you can consistently feed a real estatepartner leads day in and day out for less than half of your current budget,you will have real estate agents eating out of the palm of your hand. Activitybreeds higher sales, easier recruiting, more agents working in office and pay-ing desk fees to receive leads, and MOST important to you … a happy realestate partner or two.

Where do you get exclusive buyer and seller leads and how can you deliv-er them to your partners on a real-time basis? Our staff of mortgage and realestate marketing professionals can help with the entire process, in fact, weare giving 10 leads away free on any purchase loan marketing consultation.I can personally set you up with a specialist in your state, simply e-mail meat [email protected].

Raymond Bartreau is Chief Executive Officer of Best Rate Referrals. He maybe reached by phone at (800) 811-1402 or [email protected].

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Soaking Up REO Inventory Like a SpongeBy Daren Blomquist

The perception continues to persistthat bank-owned properties aresaturating the housing market

nationwide, making it difficult forbanks to unload these properties andgiving buyers the upper hand in sub-mitting lowball offers.

I overheard a conversation atlunch recently confirming this. Agroup of businessmen were talkingabout a real estate-owned (REO)property just listed for sale in LaderaRanch, Calif., a large development inOrange County sold at the peak ofthe boom and now littered with fore-closures. One gentleman said he wassurprised at the asking price persquare foot of just $183, which heconsidered a bargain. But one of hislunch buddies chimed in and recom-mended that he should still come inwith an offer well below the askingprice—and move on to anotherproperty if that offer was rejected.

But trends in REO inventory(http://goo.gl/yg76B) suggest this cli-mate may be changing—at least insome local markets. In the OrangeCounty market, for example, REOinventory decreased 12 percent fromthe beginning of 2011 to the end ofNovember, according to RealtyTracdata. We estimate that REO invento-ry in Orange County now representsa 12.5-month supply—certainly onthe high side but not the toweringtsunami that some reports of shadowinventory conjure up.

Dwindling REO inventoryNationwide, REO inventory shrunk35 percent from January toNovember and now represents anestimated 12-month supply based onthe sales pace of REOs. In somestates the estimated supply of REOinventory is down to less than 10months—states like Idaho, Arizonaand Virginia (seven-month supply)and Missouri, Colorado and Nevada(eight-month supply).

This dwindling supply of REOinventory in many areas is the resultof delays in the foreclosure processslowing down the pace at whichlenders foreclose. The average time

it takes to foreclose nationwide(http://goo.gl/xlI19) has increased by19 percent over the past year, from281 days in the third quarter of 2010to 336 days in the third quarter of2011, according to RealtyTrac data.The average time it takes to fore-close nationally is up more thantwofold from the third quarter of2007, when it was 140 days.

These delays were caused by afirestorm of controversy surroundingthe propriety and legality of theforeclosure process itself, in somecases calling into question whetheran REO property can be sold to athird party or obtain clear title. Onerecent example of this was a Sept. 29bankruptcy court ruling in Arkansasthat found some lenders are notproperly authorized to do businessin the state and therefore are in vio-lation of the state’s non-judicialforeclosure statutes. As a result ofthe ruling, now under appeal, sometitle companies in the state nolonger issue title insurance for fore-closed properties.

But despite some extreme exam-ples like the Arkansas case, lendersappear to be ramping up foreclosureactivity in select areas and for selectportions of their distressed portfo-lios that will presumably stand up toincreased scrutiny.

Evidence of this ramp up is arecent surge in the earlier foreclo-sure filings that start the foreclosureprocess. These default filings spiked33 percent back in August(http://goo.gl/a32yV) and haveremained elevated since then,RealtyTrac data show. Scheduled fore-closure auctions, the second stage ofthe foreclosure process in most states,reached a nine-month high inNovember (http://goo.gl/t15uX), indi-cating this wave of delayed foreclo-sures is gradually making its waythrough the foreclosure process.

Many of these delayed foreclo-sures will eventually become REOs,meaning an increase in REO invento-ry. But that won’t necessarily be aterrible thing for many markets thatare primed to quickly absorb addi-

tional REO inventory—particularly if thatinventory is in reason-ably good condition.

In contrast, some otherlocal markets are in stillsaddled with a largeinventory of REOs. Inthese REO saturated mar-kets, lenders and servicersshould think twice beforeadding more bank-ownedproperties to the backlog.Instead they may need tomore seriously considerforeclosure alternativessuch as loan modification,short sale or even donat-ing property to local landbanks.

Top REO absorbent marketsAll of these markets had REO invento-ry representing less than eightmonths as of the end of Novemberand at least 400 REO sales in the sec-ond quarter of 2011, according to theRealtyTrac U.S. Foreclosure SalesReport (http://goo.gl/CdgGP).

The Virginia Beach-Norfolk-Newport News metro area topped thelist, with 1,250 REO properties repre-senting a 3.07-month supply. Boisewas second on the list, with 812 REOproperties representing a 3.66-monthsupply.

Even though the Phoenix metro areaposted a massive REO inventory of

27,307 properties as ofthe end of November,the blazing pace of REOsales in the city is help-ing to keep its estimatedmonthly supply of REOinventory at 6.28months—enough to bethird place on our list ofREO absorbent markets.

Other top REO absorbentmarkets were Modesto,Calif.; Sacramento, Calif.;Richmond, Va.; Lakeland,Fla.; Stockton, Calif.; Denverand Akron, Ohio.

Top REO saturated marketsAll of these markets had

an active REO inventory of more than4,000 properties as of the end ofNovember, representing at least a15-month supply. The Boston-Cambridge-Quincy metro area ledthe pack with 5,678 active REOs rep-resenting a whopping 133-monthsupply because of an anemic REOsales pace.

Some landmark rulings by theMassachusetts Supreme JudicialCourt in 2011 have largely frozen upsales of foreclosed property in thestate. Most recently, the court ruledin October that the purchaser of aproperty in a flawed foreclosure saleis not the true owner of that proper-ty. This October ruling, in the case of

“Nationwide, REOinventory shrunk 35 percent from

January to Novemberand now represents an

estimated 12-monthsupply based on thesales pace of REOs.”

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Bevilacqua vs. Rodriguez, built onthe court’s January decision in thecase of US Bank vs. Ibanez, whichsaid that a bank cannot foreclose ona property when the bank does notsufficiently prove that it owns themortgage.

Second place on the REO saturatedlist was the Birmingham, Ala., metroarea, with total REO inventory of 5,417representing a nearly 100-monthsupply. The most populous county inthe metro area, Jefferson County,filed the largest municipal bankrupt-cy in U.S. history in November.

With an REO inventory of 4,698representing a 24-month supply, theSalt Lake City metro area is numberthree on our list of REO saturatedmarkets. Kandy Clayton, broker/owner atClayton & Associates Real Estate inSandy, Utah, and member of theRealtyTrac Agent Network, noticedan increase in the number of HUDREO properties in the region startingas early as November 2010.

“Listing brokers for HUD startedreceiving properties in November(2010). With that came a huge influxof properties on the market.” saidClayton, a HUD listing broker whonoted that many of those propertieswere in poor condition and in needof significant repairs. “I neverthought I’d sell a $50,000 houseagain but I did this year.”

Clayton said that investors havebeen willing to snatch up many ofthose highly distressed HUD proper-

ties, but that a large shadow invento-ry of REO remains unlisted.

“I’m seeing a ton of trustee’s salesgoing on, also a lot of REOs out therethat are not on the market yet,” saidClayton.

Other top REO saturated marketswere Milwaukee; Cincinnati;Orlando; Detroit; Philadelphia; CapeCoral-Fort Myers, Fla. andMinneapolis-St. Paul.

Options in REO saturated marketsA closer look at the REO saturatedmarket of Detroit may provide someinsight on how lenders and servicersmight most effectively manage andsell REO inventory in similar mar-kets.

With 33,309 unsold bank-ownedhomes in the six-county region—down 36 percent from the peak of52,341 unsold REOs in December2008—Detroit has an estimated 16-month supply of REO inventory,according to RealtyTrac data. Muchof that inventory is highly distressedand unattractive to most buyers,according to Anne Piekarz,broker/owner at MI Realty Group inSterling Heights, Mich., and a mem-ber of the RealtyTrac Agent Network.

“We list for Fannie Mae, and wehave some properties in Detroit,” shesaid. “Horrible, horrible, horrible. …You can’t go down there by yourself.You have to go in the morning andyou have to go with a partner.”

But in the suburbs surroundingthe city of Detroit, well-priced REOinventory in good condition is hardto come by, according to Piekarz andother local real estate agents.

“There is a vast majority of buyerswho cannot find homes for sale for agood price in good condition,” saidOakland County real estate brokerIan Whitelaw, who added he thinksthere is a “backlog of buyers” forthese types of properties.

Lenders and servicers could effec-tively approach markets like Detroitwith a two-pronged strategy. Highlydistressed inventory in the foreclo-sure pipeline could be donated to alocal land bank, if one exists, sincelittle demand exists for this invento-ry. On the other hand, REO proper-ties in decent condition and in desir-

able neighborhoods could be pushedmore quickly to market as these arelikely to be snatched up quickly ifpriced correctly.

Daren Blomquist is director of mar-keting communications for RealtyTrac Inc. With RealtyTrac since 2001,Daren currently manages the comp-any’s public relations, marketingand advertising efforts. His dutiesinclude the creation of the compa-ny’s monthly and quarterly foreclo-sure reports, which are cited bythousands of media outlets nation-wide, including all the major newsnetworks and leading publicationssuch as The Wall Street Journal, TheNew York Times and USA TODAY. Hemay be reached by e-mail [email protected].

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REOs in 2012: The Key Word is “Trust”By David Lykken & Jon Traver

Webster’s Dictionary defines theword “Trust” as: Reliance onthe integrity, strength, ability,

surety of a person or thing; confidence.When dealing in the wonderful world ofreal estate-owned (REO) properties, Idon’t think there is a more importantword than trust. Let me explain what Imean …

As we begin 2012, many of the socalled “experts” we see on televisionand in the print media are talking asthough the industry has turned the cor-ner with regards to REOs and foreclo-sures. Those of us who live and work inthe mortgage and real estate industriesknow better. I’m not sure that anyonereally knows the true scope of the prob-lem, but we all know we have severalmore years of work to do. Having saidthat, let’s get to work!

Our hope with this article is to giveeveryone who works in the REO space afresh and hopeful start to what is sureto be another challenging year. Thereare so many different angles to takewhen faced with this unique challenge.

Let’s look at our first option, hiring realestate agents to list and help sell our REOs.This has been one of the most commonways that REOs have been moved. Successis dependent upon a number of things;however, there are a few common mis-takes when using this method.

The first mistake made is in how anagent is chosen to list a REO. Jon Traver,who is co-authoring this article, has aunique perspective on the REO business,as both a long-time member of theMortgage Bankers Association (MBA) anda successful mortgage banker and loanoriginator, and as a member of theNational Association of Realtors (NAR) andsuccessful Realtor. It has always beenamazing to us the caliber, or lack thereof,of Realtors who are chosen to handle thisbusiness. Don’t get us wrong, there aremany great and knowledge Realtorsworking and succeeding in this space, butthe vast majority of the time, the inter-view process is lacking and usually drivenby the Realtors’ willingness to work for ascheap as possible. If the saying “You getwhat you pay for” doesn’t mean anythingto you, it should.

The best and most successful Realtors

are busy and have no need to work for nextto nothing. If you choose a Realtor to han-dle your REO business by who is willing todiscount their fees, you will find many tak-ers. However, a closer look at that groupwill show you that many of the agents aresimply not that good or they are only inter-ested in getting a listing. Selling REOs istough enough, but trying to do so with aRealtor who doesn’t have the ability ordesire to help you determine the best pricefor your property is not very smart.

You must first find the real estateagents who are committed to doing thebest job for you. Build a plan with thatagent and TRUST them when they giveyou advice. If you are simply sendinglistings to the lowest bidder, do youreally have the confidence in them andwill you trust them to do the job youwant and need? Will they work as hardfor you if they are only making a smallpercentage of their usual commission?While we have worked with agents whohave provided volume discounts forhigh volume and have done a great job,but if your primary decision revolvesaround getting a discount, you there’s agood chance you will be disappointed.

Now let’s move on and assume thatyou have chosen “the right” Realtor,you must trust them. If you are workingon a long-term relationship, you shouldbe able to trust their advice. If youdon’t, you have to go back and examinewhether or not you made the rightchoice. Whether the issue is that ofdetermining the right listing price, orwhether to accept or counter an offer,listening to the professional is impor-tant. We have seen so many poor deci-sions made because a decision tocounter an offer was made by someonewho either never worked in real estateor was very inexperienced. A goodagent will earn their commission manytimes over and save you money withtheir professional advice. If you are notsure how to find these types of agents,here’s some real simple advice … askaround and ask for references. Thereare plenty of them out there who areready, willing and able to help.

Mistake number two … we forgetthat a seller is a seller, whether it be aperson or a bank. There is so much

advice that real estateagents give to normal sell-ers, and yet banks almostnever take the sameadvice from their agents.There is a reason thesetopics are consistentthroughout the industry,they WORK!

When Mr . T raverworked as a listing agent,he gave the same adviceon every listing appoint-ment. Almost always, theclient would take hisadvice and his successwould come when he soldthe home. It is amazing tous that banks almostnever take the sameadvice when given.

It’s important to minimize the outof pocket expenses for any seller, bankor otherwise. However,sometimes there is workthat needs to be done,and will provide a goodreturn on investment(ROI) when the housesells. Whether we aretalking about somethingas simple as painting thefront door or somethingas major as replacing car-pet, sometimes moneyneeds to be spent. If youhave followed our firsttip, hire the best agentyou can to help with yourlistings, and trust themwhen they recommendthat work needs to bedone. There are ways tokeep costs down and evenways to delay the expenseuntil you sell the proper-ty. But don’t be afraid tospend a little money to make that prop-erty a little more desirable. We canassure you that an “as-is” home in poorcondition must be discounted muchmore than the cost of a little work.

Another big mistake made in theREO marketplace, and probably the onethat costs banks the most money, is thelength of time it takes to close a pur-chase. This is a lesson in Business 101.Most businesses work to make it as easyas possible to do business with them.Why do we make it so hard? Buyers’agents are well aware of how long itusually takes to purchase an REO prop-

erty. Due to this fact, thevast majority of buyersare instructed to not evenconsider one. Even if aclient is willing to wait,do you think the agentwants to wait for theircommission? Of coursenot! We simply mustmake the process fasterand simpler for thebuyer. This brings morebuyers into the market,which increases theprices we can expect.Trust is the issue here aswell, since most delaysseem to occur while wait-ing for a higher-levelemployee to approve acontract. If we trusted

our plan and our team, this wouldn’t benecessary as often.

With so many chal-lenges to overcome whenselling REOs, many arelooking into turning theirproperties into rentals.Even Fannie Mae is mov-ing in this direction, andbefore long, we mighthave a whole new groupof landlords. Choosingthe right property man-agement company tohelp you through thischannel is going to be avery important process.In many markets, proper-ties are so far underwa-ter, that renting seems tobe the only option. If youdo decide to become alandlord, be very, very care-ful. Once you have pickedyour property managementcompany, TRUST them.

They are the experts and the ones with theexperience, so listen to them.

When Jon used to meet with clientsduring a listing appointment, here iswhat he told them, “I cannot promiseyou what your home will sell for, but Ican promise you that we will get thebest price possible.” His clients trustedhis expertise and his ability to helpthem get the best price. Would youtrust your partner if they made thestatement to you?

In summary, we leave you with thisadvice to help you work through yourREOs in 2012 … surround yourself and

“If you choose aRealtor to handle

your REO business by who is willing todiscount their fees,

you will find many takers.”

—David Lykken

“With so many challenges to overcome

when selling REOs,many are looking into

turning their propertiesinto rentals. Even

Fannie Mae is movingin this direction, andbefore long, we might

have a whole newgroup of landlords.”

—Jon Traver

your company with knowledgeable pro-fessionals and TRUST them! Whateveryour position, the path to success isalways the same … surrounding your-self with smartest people, and then lis-ten and TRUST them and their advice. Ifyou follow this simple advice, your 2012will be better than your 2011.

David Lykken is president of mortgagestrategies and managing partner withMortgage Banking Solutions. He hasmore than 35 years of industry experi-ence and has garnered a national repu-tation, and has become a frequent gueston FOX Business News with Neil Cavuto,Stuart Varney, Liz Claman and DaveAsman with additional guest appear-ances on the CBS Evening News,Bloomberg TV and radio. He may bereached by phone at (512) 977-9900, ext.

10, or e-mail [email protected] or [email protected]. Jon Traver is production con-sultant—branching, recruiting and LOtraining for Mortgage Banking Solutions.Jon has spent 12 years forging referralrelationships with builders and realtorsfor his own mortgage company. He hasextensive experience working withbranch companies to grow their busi-nesses through branch and LO acquisi-tion, as well as building long-term busi-ness development plans. Jon trains exec-utives, branch managers, and loan offi-cers how to redefine who they are andwhat they do. He then helps them builda game plan for taking that new knowl-edge to the streets, including the execu-tion. He may be reached by phone at(512) 977-9900, ext. 112, (972) 467-3990or e-mail [email protected].

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An REO Obstacle CourseBy Ivan Choi

vicers need to reducemortgage payments tolevels affordable for bor-rowers—for a minimumof three months and up tosix months for some—while these eligiblehomeowners can look fora new job.

Through forbearance,ratios of monthly housingpayments-to-income areallowed to move up to 31percent while a borroweris unemployed. The typi-cal percentage of housingpayment-to-income wouldbe at 28 percent. Servicersmust now offer temporaryassistance to unemployedborrowers who meet specif-ic criteria.

The criteria also factorsinto loans insured underthe Federal HousingAdministration (FHA). All servicers arerequired to consider an alternative modi-fication approach that emphasizes a prin-cipal write-down for HAMP-eligible bor-rowers. The alternative principal reduc-tion allows some underwater homeown-ers to reduce the principal balance oftheir mortgage in steps over three years ifthey remain current on payments.

However, these rules do not complywith capital-stack investors in an RMBStrust. Servicers are supposed to initiallytreat the write-down amount as for-bearance and will forgive the forbear-ance amount in three equal steps overthree years, as long as the homeownerremains current on payments. How

does this help the loantrust or the investor if thevalue of the homesdecline while a borrowerkeeps making payments?

A recent CoreLogicstudy found that nationalhome prices continue tobe pressured by a streamof distressed propertiesthat threaten to pushprices even lower. Thereport said the nation’sshadow housing invento-ry stood at 1.6 millionunits, or a five-month sup-ply in October, as theNational Association ofRealtors (NAR) revised itsexisting home sales down-ward by 14 percent from2007 to 2010.

Enter the secondphase of the HomeAffordable Refinance

Program, or HARP 2.0. Homeownersmaking current payments can also refi-nance with an unlimited LTV ratio.Despite being underwater on the home,the borrower can stay in their home ifthey have only missed one payment with-in the past six months.

The U.S. Department of the Treasurysaid forbearance will not cost taxpayersanything. However, the Treasury seeks topenalize future homeowners with anincrease in guarantee fees for Fannie Maeand Freddie Mac because of their losses.

These programs are costing investorsand capital-stack investors in RMBS trusts

“If we continue to seehome values decline

through 2013, asZillow reported, and

no incentives to foreclose on homes, we

may see valuationsdecline even further to

the point that theywill never regain

anything close to theiroriginal value.”


An obstacle course, unlike a sim-ple sprint to the finish line, isfilled with walls to climb, tires to

step through and hurdles to jump over. It’snot a simple race, but a skillful art inmaneuvering quickly to the finish line.

The same can be said for servicersworking through loan modificationsand real estate-owned (REO) disposi-tions. In a normal environment, ser-vicers would have a smooth REO dispo-sition. In the current situation, unlessthey map out a proper course for it—taking care of all the obstacles thatstand in the way—they can face anumber of unexpected hurdles.

A wall of properties in distress is thefirst obstacle in this race, and one thatsustains itself through regulatory hurdlesset up by the federal government to tryand keep borrowers in their homes.

Some of those hurdles include theHome Affordable Modification Program(HAMP) and the second phase of theHome Affordable Refinance Program. Ithink of them as hurdles because they areobstacles that do not necessarily align ser-vicers with their responsibilities to theinvestors or residential mortgage-backedsecurities (RMBS) trusts. Indeed, theseobstacles sometimes stand in the way of aservicer doing what is best for the investoror the trust.

Servicers now need to maneuver andstep through higher loan-to-value (LTV)and debt-to-income (DTI) ratios, for-bearance and extensions while all thetime, ensuring proper maintenanceand condition of the property. All ofthese obstacles stand in the way beforeservicers can climb a wall of distressedproperties and work toward getting tothe finish line.

Normally, servicers would followthrough investor guidelines and have thewind at their backs knowing that they aredoing their best for the investor or residen-tial mortgage-backed security (RMBS) trust.An unemployed borrower would gothrough the normal procedures, workingwith a servicer at trying to make theirmonthly mortgage payments. If the bor-rower could not make their monthly pay-ments in 12 months, the house would even-tually need to go into REO. The wall at theend of the course would be manageable.

Then, in a normal REO disposition, thebank would auction the property to thehighest bidder, ensuring that the proper-ty brings the highest value for theinvestor. It was not necessarily a sprint tothe finish line, but a manageable coursewithout any major hurdles or obstaclesthat stood in the way, apart from prevail-ing market conditions.

Today, however, under HAMP, ser-

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time and declining valuations. Servicersface a double-edged sword and arecrushed by both sides of the equation.They face lawsuits by not following HAMPor HARP Phase II, but they may also facelawsuits from RMBS trust investors.

Even runners on an obstacle coursehave room to maneuver among thetires, hurdles they must jump over andwalls they have to climb. Servicers, how-ever, are being asked to jump majorhurdles and climb huge walls in orderto fulfill their priorities.

While nobody wants to see home-owners evicted from their properties,the HAMP program will cause furtherdelays on homes likely to go into fore-closure, thus decreasing their value. Asa result, this obstacle course increases afinal wall of properties that may be los-ing value rather than gaining it.

RealtyTrac recently reported a 14 per-cent decline in foreclosures during the pastyear, but there still remains a significantnumber of foreclosures across the country.The same report said that with nearly224,400 U.S. properties in foreclosure dur-ing November, a three percent decreasefrom the previous month, one in every 579U.S. housing units had a foreclosure filingduring the month.

A slow, methodical walk to the foreclo-sure finish line only means more foreclo-sures and, with so many REO propertiesalready, their condition becomes moredifficult to maintain.

Neighborhoods and communities canbecome blighted as foreclosure filingscontinue to increase. The result is thathome values decline and, when they go toauction, the investor or RMBS trust is theone left holding the bag.

A recent survey conducted by ZillowInc., reported U.S. home prices will con-tinue to decline through late 2012 or early2013, as negative equity and weak jobgrowth hinder a real estate recovery.

More than 100 economists, propertyexperts and investment and market strate-gists said prices could rise nearly three per-cent each year after 2013 and through2016, but how will this be possible withoutjob growth and purchase activity?

Investors will most likely purchaseforeclosed properties, fix them up andrent homes rather than occupy them untilvaluations start to increase. What will thatdo to the communities and the home val-ues and what will that do to new multi-family construction?

Meanwhile, if borrowers do not remaincurrent on their payments in the HAMP

program, servicers need to double reloca-tion assistance payments for borrowerssuccessfully completing a foreclosure alter-native, up to $3,000. Under HARP Phase II,homes can remain well underwater if bor-rowers can refinance. How many times willthey be able to refinance before not mak-ing their monthly payments?

Despite increased incentives to servicersand lenders under the HAMP program,including increased incentives for extin-guishment of subordinate liens to encour-age more short sales and other alternativesto foreclosure, servicers must still bear thesecosts, including the addition of a singlepoint of contact under the program.

Some servicers decided to drop out ofthis obstacle course race and let someoneelse run it for them. For this reason, therehas been a considerable increase in sub-servicers handling these loans. A recentsurvey found that the nation’s sub-ser-vicers were processing $386 billion ofloans as of Sept. 30, a 20 percent increasefrom the same period a year earlier.

The key to keeping valuations high is tofind true value in the marketplacethrough purchase activity, and to ensurethat homes are properly maintained andmanaged to keep values from decliningbefore they are ready to sell.

If we continue to see home valuesdecline through 2013, as Zillow reported,and no incentives to foreclose on homes,we may see valuations decline even furtherto the point that they will never regainanything close to their original value.

Lower values remain a large hurdle toovercome in this obstacle course. Theresult will simply cause investors, includ-ing RMBS investors, to stay away from themarketplace longer and we will continueto see mortgage originations through FHA,Fannie Mae and Freddie Mac. If this hap-pens, not only will investors and trusts endup holding the bag, but taxpayers as well.And that will be yet another hurdle—per-haps a huge wall—we will all have toattempt to climb over even after thisobstacle course race has ended.

Ivan Choi is senior vice president forMatt Martin Real Estate Management(MMREM) based in Arlington, Va. He isthe current president of the board ofdirectors of REOMAC, was a senior execu-tive in Bank of America’s mortgageorganization and an expert consultant inbusiness development and default man-agement services prior to joiningMMREM in 2011. He may be reached bye-mail at [email protected].

Rehab or Sell “As-Is?”By Cheryl Lang

Today’s mortgagelenders and ser-vicers have much in

common with medievalalchemists ... but insteadof turning common met-als into gold, they striveto transform non-per-forming properties intoprofitable assets.

Properly managing andselling distressed propertiesis a difficult task, and onethat will undoubtedly con-tinue to challenge theindustry throughout 2012.It will take 45 months toclear the $384 billion in dis-tressed homes on the mar-ket in the U.S., according toa report released byStandard & Poor’s inNovember 2011.

A chief question for those holdingdistressed properties: Should theseproperties be rehabilitated beforebeing placed on the market for sale, orshould they be sold “as-is?“ It takes asavvy asset manager with a good net-work of real estate and constructionprofessionals to know when it is worthrehabbing a real estate-owned (REO)property for the greatest return-on-investment (ROI).

Often, properties are needlessly sold in“as-is” condition when they would fetch aconsiderably higher price with some reha-bilitation work. The average pricing fordistressed property was substantiallylower than for non-distressed property,according to Campbell/Inside MortgageFinance HousingPulse Tracking Surveyreleased in late December. Non-distressedproperties sold for an average of $258,900in November, the survey showed. Theaverage short sale sold for $209,000, whilethe average move-in ready REO sold for$189,700. As would be expected, the aver-age sale price for a damaged REO proper-ty was well below at $98,600, according tothe HousingPulse survey.

Clearly, repairs and renovations tomake a home “move-in ready” canmake a big difference in the selling price.Companies that specialize in buying dis-tressed assets, rehabilitating them and

selling them quickly canmake substantial profits.Outsource professionals,such as asset managementcompanies that specializein all aspects of REO man-agement, are especiallyadept at knowing whenand where to rehab prop-erties for their clients. Theyrealize that ROI is individ-ual to each property andmarket, and that there aretimes when a more exten-sive rehab will yield agreater return.

It’s a delicate balanc-ing act, as more extensiverehabs can take longer tocomplete and have thepotential to increase theholding period. So, what

sorts of things should be consideredwhen deciding whether to rehabilitatea property, or to sell it as-is? And, whendoes it NOT make sense to rehabilitatea property?

The following are some of the mainfactors to be considered:

LocationThe old real estate adage, “Location,location, location” holds especially truein the distressed property managementbusiness. Where is the property locat-ed? If it’s in a desirable area, typically itmakes sense to do some rehab beforeputting it on the market to sell.

Some of the factors to consider whendetermining whether a location is desirableare: Is the homeownership rate greater than50 percent? What is the percentage ofhouseholds with children? What is the edu-cation level of the residents? What is theaverage annual income of the residents?Answers to those questions can help estab-lish whether to rehabilitate houses in a par-ticular neighborhood or area.

There are certain areas of the coun-try where it just doesn’t make sense torehabilitate a home. Parts of Detroit,Los Angeles and some Cleveland neigh-borhoods are so rundown and crime-ridden that theft and vandalism oftenruin any attempts made at repair. Shortof putting an armed guard or a trained

“As communities continue to struggle

with growing inventories of vacantproperties, the trend

for legislators to hold property

owners accountablewill grow.”

guard dog on a property 24 hours a day,it’s difficult to protect properties inthese neighborhoods, so lenders or ser-vicers would be wasting their money onrepair and rehabilitation costs.

Natural disastersWhen a natural disaster, such as a hurricaneor tornado occurs, there are often insurancefunds available for repairs. It makes perfectsense to use the insurance proceeds torepair the properties and improve theneighborhood. In some cases where a set-tlement has been announced, there arepools of funds available for repairs.

For example, in late December, therewas a settlement announced that allowsfor the repair thousands of homes withKnauf Plasterboard Tianjin drywall thatwas manufactured in China. A fund will becreated with up to $1 billion to cover thedefective drywall repairs at Knauf’sexpense. Most of the homes are in Floridaand Louisiana, with some located inMississippi and Alabama.

In those states, large quantities of defec-tive Chinese-made drywall were importedduring the housing boom and after a stringof Gulf Coast hurricanes. After the housingbubble burst, lenders and servicers foundthemselves holding many distressed prop-erties in those Southeast states with thedefective drywall, which typically requiresa costly repair or replacement.

Asset managers had little choice but tosell these toxic non-performing assets in“as-is” condition as the cost of remediationprotocols was too prohibitive. Last year, amuch less invasive and more cost-effectivesolution for drywall remediation wasbrought to the market. By spraying a spe-cially-formulated foam-type biochemicalinto damaged areas, a newer “in-situremediation” technique is providing along-term remedy for the odor and thedamaging effects of the airborne emissionsfrom defective drywall.

The development of the in-situ drywallremediation technique is a great example ofhow a resourceful solution can make reha-bilitation of damaged properties feasible.Distressed properties that were previouslydeemed too expensive to repair are nowbeing upgraded to “move-in” condition effi-ciently, with costs kept to a minimum.

Target marketIs the target market comprised of owner-occupants or investors? If the goal is toreduce turn times and get the asset off thebooks, the target market would be a cashbuyer, which is almost always an investor.

If the repairs are extensive and mayrequire an extended hold time, whichtranslates into money, the target marketmay, again, be the investor.

On the other hand, preserving proper-ties is good for neighborhoods, so if thegoal is to keep the community intact, thenowner-occupants would be the target mar-ket. Often, the underwriting and investorguidelines will dictate whether repairsneed to be made. For example, the FederalHousing Administration (FHA) requires thatthe property be in acceptable conditionand pass an FHA inspection in order toqualify for FHA financing.

So, when targeting first-time home-buyers or buyers who may be eligiblefor an FHA mortgage, rehabilitating theproperty is generally called for. Theproperty will need to meet the mini-mum standards set by the FHA in orderto qualify for FHA funding.

Rehabbing helps restore neighborhoodsIn addition to the obvious benefit ofrepairing or rehabilitating a property—anincreased selling price—there are a fewother advantages. From a societal perspec-tive, fixing up vacant or rundown proper-ties helps preserve neighborhoods.Rehabilitated homes are generally sold toowner-occupants, which helps bolster theintegrity of a community.

Lawmakers are taking note. As legis-lators at all levels of government workto combat crime, blight and otherthreats to the health and safety of theircitizens, they are starting to look to theowners of distressed and vacant proper-ties for answers. Chief among theirquestions: What is being done to pre-serve communities?

Lawmakers see vacant propertieswith maintenance and safety issues as ahaven for drug houses and prostitution,and the longer a property remainsvacant, the more apt it is to invite crimeand vandalism. Repairing and sellingthe properties can help breathe newlife into potentially dangerous areas.

As communities continue to strugglewith growing inventories of vacantproperties, the trend for legislators tohold property owners accountable willgrow. Consider the State of California’sprobe into the handling of foreclosedproperties by the government-spon-sored enterprises (GSEs). In lateDecember, California Attorney GeneralKamala Harris filed a lawsuit againstFannie Mae and Freddie Mac over mort-

gage and foreclosure problems in thestate. AG Harris is investigating FreddieMac’s and Fannie Mae’s involvement in12,000 foreclosed properties inCalifornia where they serve as land-lords. The lawsuit also asks the GSEs toreveal whether they have informationon the decreased value of those homesdue to drug dealing or prostitution, aswell as explosives and weapons foundon those vacant properties.

New laws are also taking effect at thelocal level. Banks that own vacant ordilapidated properties in Las Vegas couldface fines or jail time under a foreclosureordinance approved by the city of LasVegas in December. The ordinancerequires banks to list empty, foreclosedproperties on a registry and contains mis-demeanor penalties for allowing a proper-ty to fall into disrepair.

There’s no doubt that the world of

distressed asset management haschanged dramatically in the past fewyears. Savvy property owners and assetmanagers realize that simply crunchingnumbers on a spreadsheet is notenough anymore. A new and more cre-ative approach to dealing with non-per-forming assets is called for—one thatmeets the needs of the owner orinvestor of the property, while stillhelping to foster stable and safe neigh-borhoods. Doing so is important to thehealth and recovery of the housingmarket, and the economy overall.

Cheryl Lang is president and chief execu-tive officer of Integrated MortgageSolutions, a Houston-based provider ofcollateral protection resources for themortgage servicing sector. She may bereached by phone at (281) 994-4538 or e-mail [email protected].

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HUD REOs: Six Things Every MLO Needs to Know

By Jeff Mifsud

This article is written for, in myopinion, some 99 percent of themortgage loan originators who do

not specialize in providing financing forU.S. Department of Housing & UrbanDevelopment (HUD) real estate-owned(REO) purchases, but over the course oftime, are likely to come across a few buy-ers who may want to purchase HUDhomes. The purpose of this article is toprovide insight into the more importantaspects of processing these loans. This willassist you in having greater success whenworking with buyers of HUD homes.

A significant percentageof these homes are in disrepairHUD homes are generally sold as-is, withlittle to no repairs done on behalf of thebuyer. Given this reality, HUD tends toprice their homes in order to attract cashbuyers who don’t need your services. Onoccasion, you may have FHA buyers whowant to by a HUD home, but the condi-tion of the property may not meet theFHA Minimum Property Requirements.In such an instance, having the ability todo 203(k) financing is crucial since the203(b) doesn’t always work. Havingaccess to the (k)s, however, is quite dif-ferent than having the knowledge toprocess and close them. Suffice it to saythat if you have to flip a (b) to a (k), don’tgo at it alone. Get help from an expert in

structuring the (k)s, because the lastthing you want is a horrible experiencethat will guarantee that your clients willnever refer business to you!

Implore your clients toget a home inspectionThis is, of course, good advice for allhomebuyers, but critical in these situa-tions–yes, even when the FederalHousing Administration (FHA) appraisalperformed by HUD doesn’t state anydeficiencies. HUD does REO appraisalson their HUD listings and forwardsthese appraisals on to the buyer’slender when requested. Lenders canunderwrite from this REO appraisal andare responsible for making sure theproperty meets FHA’s MinimumProperty Requirements (MPR) and mayneed to request a copy of the buyer’shome inspection to learn more aboutthe property. The last thing you want isfor a buyer to purchase a home, movein, and then discover an expensiverepair that needs to be made.

The highest and best bid winsI use the term bid because all offers onHUD homes are done online throughHUD’s Web site, HUDHomeStore.com.Knowing this, you can help your buyers’real estate agent structure the transac-tion to win the bid. HUD likes to sell

homes to primary occu-pants, so if you have ahomebuyer who is tryingto buy a HUD home astheir primary residence,you have an advantage.

HUD wants to earn asmuch as possible on thesale, so one strategy, ifthe buyers can afford it,would be not to ask forHUD to pay for any of thebuyer closing costs.Additionally, if the clientscan afford it, have thebuyer pay a portion of thereal estate agent’s com-mission directly in orderto decrease the amountHUD has to pay the buyeragent (HUD will pay threepercent to the buyeragent and three percent of the buyerclosing costs).

For example: On a $100,000 offer,instead of asking for the full $3,000 (threepercent) toward mortgage closing costsand $3,000 (three percent) for the buyeragent commission, ask for $0 towardclosing costs and only $2,000 in buyeragent commission (have the buyer paytheir agent $1,000 directly so they receivethe full commission for their services).This is a winning strategy and few realestate agents will use this structure, butwill instead, submit the bid with the fullthree percent commission and three per-cent toward closing costs.

You have to order a new case numberEach HUD home will have a currentcase number attached to it. Since it wasFHA financing that was defaulted on toproduce the foreclosure. However, youwill have to order a new case numberfor your buyer because it will be newFHA financing. When entering the caseinformation in FHA Connection, thelender should select “Real Estate-Owned” for the Processing Type.

A buyer can submit offers on multiple HUD homes at one timeReal estate brokers may submit multi-ple bids on an individual property, aslong as each bid is from a different pur-chaser. If a buyer submits multiple bidson the same property, only the bid pro-ducing the highest net return to HUDwill be considered. If an owner-occu-

pant buyer submits a bidon more than one prop-erty, the bid that pro-duces the greatest netreturn to HUD will beaccepted while all otherbids from that buyer willbe eliminated from con-sideration. However, ifthe prospective owner-occupant buyer has sub-mitted the only accept-able bid on anotherproperty, then that bidmust be accepted andall other bids from thatbuyer on any otherproperties will be not beconsidered.

Earnest moneydeposits are not

automatically refundedShould the buyer’s home inspection beunsatisfactory or the loan be denied,HUD does not have to refund thedeposit as would be the case on a regu-lar FHA purchase. HUD determinestheir refunds on a case by case basis, soyou must make this clear to your clientat the time of pre-approval and do notrely on the real estate agent disclosingthis information.

HUD homes are usually priced verylow and you will have an opportunity tohelp first-time homebuyers purchase ahome that will give them a very afford-able payment. One of the greatest aspectsof our recent housing crash is the avail-ability of affordable housing. For home-buyers in today’s market, the crash hasbeen a blessing. I have found that themost satisfying experiences in my careerare those assisting a family achieve thegoal of homeownership, especially whenthey thought it was out of their reach.There’s nothing more gratifying than wit-nessing the joy on their faces, sometimesaccompanied by tears of joy, when thatdream becomes a reality.

Go FHA!

Jeff Mifsud is founder of Michigan-basedMortgage Seminars LLC, a former FHAunderwriter with 15-plus years of experi-ence originating FHA loans, an FHAexpert for LoanToolbox.com and cre-ator of The FHA Originator, a monthlyFHA newsletter. Jeff may be reached byphone at (248) 403-8181 or visitwww.MortgageSeminars.com.

“One of the greatestaspects of our recenthousing crash is the

availability of affordable housing.

For homebuyers in today’s market, the crash has been

a blessing.”

Web: www.appraisalsanywhere.com

Managing and Selling REOs in a Flooded MarketAccurate Property Valuation Equals SuccessfulPortfolio Management and Movement

By Frank Danna

Banks are in liquidation mode. Mostare experiencing losses, and with theOffice of Thrift Supervision (OTS) now

under the supervision of the Office of theComptroller of the Currency (OCC), bankscannot show the same losses that theycould prior to this merger. There is a lot ofinventory that must be managed, main-tained and ultimately moved off the bank’sbooks. Banks are under pressure from boththe regulatory agencies, and also face pres-sures from the market. Some are strugglingto make this movement happen, while oth-ers are quickly selling properties that areseverely undervalued. The marketplace isflooded with real estate-owned (REO) prop-erties that are ill-maintained and not in thecondition to compete with comparableresale properties.

Best practices approach:In-house or outsource?There are steps, however, that a bank cantake in order to more effectively managethis process and their REO portfolio, con-tributing to the overall health of the bank,despite a flooded market. A bank has twooptions when it comes to managing anREO property: Outsource the job to an REOmanagement service, or control theprocess internally. REO management serv-ices may or may not have the backgroundand expertise to seize, secure, maintainand sell the property on behalf of the bank,but banks are not in the business of man-aging properties and are challenged whenit comes to filling this role.

If a bank chooses to outsource, there areseveral factors to consider in evaluating REOmanagement services. Before the mortgagemeltdown, there was not a high demandfor these types of services. Accordingly,most have not been around for more thana few years. Is the company equipped todeal with seizure of the property, i.e. is theproperty owner squatting in the home, orhas the property owner contributed to sig-nificant destruction? Secondly, can thecompany secure and maintain the proper-ty? Mold is the number one contributingfactor in rehab expenses and can costupwards of 20 to 30 percent of the home’s

value to remediate. If the property is notsecured properly, mold will be the biggestproblem and will dramatically decrease thesalability of the home.

Once the home has been secured andproperly maintained, a price must be set.When it is time to sell the property, thereare a lot of market indicators that coulddetermine what that property is worthbased on the original appraisal report. Anaccurate price determines if a propertymoves quickly, or if the bank will need tomanage it for months, if not years.Undervaluing an REO property will resultin market flooding and will push the resalemarket down along with it. The resalemarket is forced to drive down prices inorder to compete with the flooded andundervalued REO market.

If a property is listed for more than sixmonths, there is a very good chance thatthe value of the home is no longer close toaccurate. The market is a moving target,typically in a downward trend. Six monthsof non-movement equals a considerableamount of expense for the bank in main-tenance and upkeep.

Invest now to save later:BPO doesn’t mean “bestprice option”Most properties are valued by a brokerprice opinion (BPO), which is set by theselling agent. Since few banks are able togauge the true value of the home, the BPOis the most commonly used and drivingforce behind the value of the home.

Unfortunately, BPOs don’t work. Someagents are in the practice of providing veryaggressive BPOs to banks. A low BPOenables the bank to price the property atthe low end of the market, theoreticallyallowing the bank to move the propertyfaster and the agent to turn a profit faster.One of the main issues with this is thatagents only make $20-70 per BPO, whichmight have a negative effect on the overallquality of work and may not provide truevalue to the bank.

As an alternative to a BPO, banks canobtain an appraisal to set the price.There are several benefits from choos-

ing this route, but all startwith more initial costfrom the bank upfront.An appraisal will cost thebank between $300-$400,as compared to $70-140 fora BPO. This cost becomesnegligible when there ispotential to add thousands,if not millions of dollars insome cases, in potentialvalue. When a bank lever-ages a highly-qualifiedappraiser, the appraiserbecomes personally knowl-edgeable of the REO portfo-lio in order to better under-stand the bank’s position,goals and strategy: A six-month timeline to liquidateis significantly differentthan a nine-month time-line. Understanding this nuance could bethe equivalent of success for the bank.

On average, an appraiser will value thebank’s portfolio higher than a BPO. Bankssell a property for what the understoodvalue is. If a bank has a more accurate ini-tial value, even if it is higher, it can morethan likely sell the property just as quick-ly. Understanding what other active REOproperties in the market are selling for, atany income level and state of condition,will put the bank in a better position togarner higher value for the REO. Whilethere is more upfront cost, an experiencedappraiser will value the property for whatit is truly worth, enabling the bank tomove it quickly and ultimately recovermore value in the end.

Depending on the size of the REO port-folio, a bank can better manage the

process from a microstandpoint as opposed to amacro standpoint. Fromtaking back the property, tovaluing it, to putting it backon the market, a bank cananalyze this progression tomore effectively controland even cut its losses.Being more involved in thevaluation and more suc-cessfully managing themethod will put the bankin a much better positionwhen the property goes onthe market.

Regulatory pressuresand market conditions areforcing banks to move REOproperties at values thatmay not accurately reflecthome values in the area.

Several factors contribute to the success ofselling these properties, but can be moreefficiently and profitably managed inorder to promote the highest value andhighest quality sale. Every day that a bankmaintains a property that isn’t valued cor-rectly, it is leaving money on the table andwalking away from found value. An accu-rate price does not mean depending on asubjective BPO, but requires a morehands-on approach in which a bank willbe better equipped to handle a floodedREO marketplace.

Frank Danna is chief executive officer forAppraisal Logistics, a provider of compli-ance risk management for appraisalindependence. He may be reached byphone at (866) 991-2574, ext. 222 or e-mail [email protected].

“A low BPO enablesthe bank to price theproperty at the lowend of the market,

theoretically allowingthe bank to move theproperty faster andthe agent to turn a

profit faster.”

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• 20-hour Pre-licensure - Packed with everything to successfullycomplete your pre-licensure requirements.

• Continuing Education - Exciting, NMLS approved courses thatmeet your Continuing Education needs and build your business.

MSS Learning Center(800) 963-1900

www.MortgageSuccessSource.comEmail: [email protected]

Events

“The Expo for Real Estate Professionals"For ongoing Networking Events throughout the year please visitwww.nycnetworkgroup.com.

NYC Real Estate Expo LLCAnthony Kazazis - Director

[email protected] • www.nycrealestateexpo.com646.210.2545 • 914.763.8008

FHA Audit and Licensing

First National Compliance Solutions Inc.1-800-400-4134

www.firstnationalcompliance.comBonnie Nachamie & Jonathan Pinard have assembled a team ofexperts to assist Mortgage Brokers, Mortgage Bankers, Federaland State Chartered Banks & Credit Unions with their mortgagecompliance needs.

Hard Money/Private Lending

ACC Mortgage, Inc.932 Hungerford Drive #6 • Rockville, MD 20850

240-314-0399 • 240-314-0336 faxWeApproveLoans.com

We are doing traditional subprime lending, fix & flip lending andhard money lending.

Windvest Corporation ............................877-285-0777Specializing in rehab loans for property investors in So. CA.Up to 60% ARV, 12.99% fixed rate, 3.5-5 points, 1 yr. term.Fast & professional service since '94! Visit windvestcorp.com!

Franchise

LenderCity Home Loans888.880.2489

www.LenderCity.com

LenderCity Home Loans is now offering individual franchises. Thisis perfect for the L.O. who has always wanted to open their ownbrokerage but didn't know how. Benefits include:

• Growing with a recognized brand

• Local and National marketing and advertising

• Online search engine marketing

• More aggressive lender pricing based on volumeincentives

• A proven system that generates more revenue thanaverage broker shops

• Ability to retain your license, existing corporation, andautonomy

• Lead generation

• Processing and closing services also available

Call 888-409-9770 ext 4, to register your company.

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Leads

Leads

Our network attract over one million visitors per month. Our paidlead program as well as our free lender directory will help you con-nect with targeted new consumer traffic from with high-intent con-sumers searching online for the right mortgage lender.

MortgageLoan.comSM

www.mortgageloan.com • 877-390-4750MortgageLoan.com is the largest online directory

for mortgage professionals and a favorite of consumers shopping for mortgage loans.

AAA Refi Leads.....AAA Refi Leads.....AAA Refi LeadsLearn how I went from failure to success by mailing cheap refiletters from home, closed 71 loans & made $248,954.62 last yr.I’ll show you exactly how I did it. Go to: www.Refi-Leads.NET

Income Verification Services

Advanced Data (800) 537 - 0458

[email protected]

Advanced Data is a leading national provider of data services,streamlining income and employment verification with proprietarysoftware. Clients can submit 4506-T directly through Encompass360.Also ask about our AVM and flood services!

Loanbright helps mortgage companies capture and close morebusiness through its marketing and software tools. An INC. 500awardee, Loanbright has helped thousands of companies since1999 by providing them with well over 3 million qualified sales leads.

Loanbright27902 Meadow Drive, Suite 375

Evergreen,CO 80439866-391-2709 • www.Loanbright.com

Reach affluent and creditworthy consumers who are in-market andready to transact. Bankrate is a consumer direct Web site, NOT alead aggregator. Qualified leads for every sized budget, and payonly for performance. No set up fees! No contracts! No risk!

• Reach self directed, highly qualified consumers that are activelysearching for mortgage loans• Geo-targeting – reach the right consumers in the right markets• Our proprietary Advertiser Portal gives you complete controlover your campaigns, budgets, and performance reports.• YOU determine your daily/weekly/monthly budget• Pay only for consumers who click on your listing• NO cancellation fees

Try us risk-free! Call 561-630-1257or visit www.bankrate.com/cpcprogram/ for more details.

Internet’s Leading Consumer Mortgage MarketplaceAttracting over 8 million unique

consumers every monthwww.Bankrate.com • 561-630-1257

Loan Origination Systems

Calyx Software, the #1 provider of mortgage solutions is dedicatedto offering reliable and affordable software that streamlines, inte-grates and optimizes the loan process. Find out how PointCentralcan streamline your business and create compliant processes today.

Calyx Software 800-362-2599

[email protected] www.calyxsoftware.com

Mortgage Forms

• HUD Settlement Cost Booklets• CHARM Booklets• Uniform Residential Loan Applications• HUD Case Binders

www.LendingForms.comSame Day Shipping (orders placed prior to 3pm et)

24/7 Secure e-Commerce SiteSave 33-50%

Income Verification Services

Platinum Credit Services, Inc.................631-299-2084Tax return vertification (4506 tax transcript done in less than24 hours in most cases). Call Lorenzo Pugliano, Presidentand CEO at 631-299-2084.

Regulatory/Compliance

Comergence Compliance Monitoring is the mortgage industry’s onlyComplete broker desk management software and outsource solutionfor TPO management and monitoring. We can supplement lenders in-house management and monitoring resources departments.

Comergence Compliance Monitoring, LLC630 The City Drive South, Suite 205 • Orange, CA 92868

Office: 714-740-9000 www.ComergenceCompliance.com

Are you a broker/owner or current branch manager looking toexpand your business into Mortgage Banking with FHA capabilities?Then our PARTNER BRANCH ADVANTAGE© program is perfect foryou. We are offering you all the benefits of partnering with an estab-lished lender while still enjoying your independence. US MortgageCorporation is a nationwide FHA Direct Lender with a 16 year longreputation of excellence.

YOUR SUCCESS IS OUR SUCCESS!

For more information contact THOMAS R. SIRICO, VicePresident of Business Development at (917) 923-1472 or emailat [email protected].

We look forward to sharing our services with you!

(800) LOANS-15www.usmortgage.com

Retail Branch

#1 USDA RD lender in multiple states with strong FHA/VA/CONVproduct lines as well. Don't be held hostage by a captive brancharrangement. Bank it or broker it. Have a business name/identityyou don't want to give up? We allow DBAs (subject to state rules).

Polaris Home Funding Corp.616-667-9000

[email protected]/timeforachange

Reach affluent and creditworthy consumers who are in-market andready to transact. Bankrate is a consumer direct Web site, NOT alead aggregator. Qualified leads for every sized budget, and payonly for performance. No set up fees! No contracts! No risk!

Founded in 2005, Best Rate Referrals has grown into one of thefastest growing marketing firms in the nation. By combining newtechnology with traditional direct marketing methods that produceprofitable results.

Best Rate Referrals is the direct marketing leader in the mortgageand banking industry.

• Mortgage Direct Mail & List Services• Mortgage Live Transfers• Mortgage Internet Leads• Mobile Marketing

Best Rate ReferralsThe Leading Direct Marketing Company

for Mortgage Professionals800-811-1402 • www.bestratereferrals.com

Sign-on weekly at nmpmag.com/lykkenonlending

The Lykken on LendingR A D I O P R O G R A M

Wholesale/Residential

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Wholesale/Residential

Wholesale/FHA

Icon Residential, a wholly owned subsidiary of Grand Bank N.A.,is one of the nation’s leading Conforming, Jumbo, FHA and VAwholesale lenders. Our strength, success and longevity isderived from delivering customers service that exceeds ourvalued business partners expectations. With deep industryknowledge, financial stability and innovative technology weprovide the solutions for our business partners to fund loanswhile avoiding risk.

• Direct Access to Underwriters• Competitive Pricing• Innovative Technology• Paperless Solution• Bank Funding

Icon Residential Lenders(888) 247-4207

www.iconwholesale.com

Wholesale Reverse Mortgages

Veros Real Estate Solutions is a premier technology leader in the mort-gage industry and proven leader in enterprise risk management andcollateral valuation services. Veros combines the power of predictivetechnology and data analytics for advanced automated solutions.

Veros Real Estate Solutions2333 North Broadway, Suite 350 • Santa Ana, CA 92706

(866) 458-3767www.veros.com • @verosres (Twitter)

• Arizona • Nevada • Texas • California • New Mexico • Utah• Colorado • Oregon • Washington

88 Kearny Street, 3rd FloorSan Francisco, CA 94108

Phone: (415) 632-5150 • Fax: (925) 226-1938www.bayeq.com

Now Wholesale Lending in:

Wholesale/Correspondent

BankFinancial ..........................................800-894-6900 We have money to lend for apartments, $250M to $2MM, up to75% LTV. We offer competitive rates, fees & terms. We’re com-mitted to helping you and your clients close the deal. Call us.

AMX/Land Home Financial ..................800-349-4172 AMX/Land Home Financial Services Wholesale LendingDivision - Great Rates, Great Programs, Great Service.Offering financing options that work in today's market. • Paperless! Quick and Easy!

• Top Tier Account Executives• Committed to Wholesale• Operations that Earn Your Business

TMSfunding Wholesale Lending326 W Main Street • Milford, Ct. 06460

888.371.2989 • WWW.TMSFUNDING.COMYour Partner in Success!

We offer competitive pricing and fast turn-times for FHA, VA,Conventional, and USDA programs without having a retail pres-ence in the industry. We are a wholesale lender with 22 years ofexperience and believe in exceptional service.

Terrace Mortgage4010 W. Boyscout Blvd., Suite 550

Tampa, FL 33607866-934-4631 • www.terracemortgage.com

CBC National Bank is one of the nation’s fastest growingwholesale lenders offering Conventional, FHA, VA, and USDA.The most important aspect of being a leader in today’s market isthe ability to build and maintain a meaningful relationship witheach customer. We understand that these meaningful relation-ships coupled with competitive pricing and efficient technologyare the pillars of today’s lending environment.

We are now hiring Account Executives in AL, TN, KY, VA, & MD.

Contact Stu Ehrlich in our HR department at

[email protected] for further details.

Big Enough to MATTER…Small Enough to CARE

CBC National Bank3010 Royal Boulevard South, Ste. 230

Alpharetta, GA 30022888-486-4304

If your ad was here, you would be seen by

191,181 MortgageProfessionals looking

for resources to help themin their business.

The Resource Registry is a directory of lenders(wholesaler or retail thatare recruiting), affiliatedservices and resources

that is seen by more than 191,181 active

Professionals.

Call 888-409-9770 ext. 4to register your company.

Bookmark this!Access these listings

online atnmpmag.com/directory_list

Flagstar Wholesale Lending, a division of Flagstar Bank, is one ofthe nation’s largest wholesale and correspondent mortgagelenders, providing the technology, products, service and supportthat independent mortgage brokers, correspondents, and bankersneed in today’s mortgage arena. In the ever-changing environ-ment of mortgage banking, Flagstar takes pride in accommodat-ing the specific needs of each customer. At Flagstar, we under-stand that you need every available advantage to stay ahead ofthe competition. This is why we provide multiple technologyoptions to meet your needs to register, lock, underwrite, close,fund and deliver your loans. Our wholesale website(wholesale.flagstar.com) and the loan processing tool Loantracprovides our customers with the functionality that make it easierand faster to close loans, saving you time and money! Visit whole-sale.flagstar.com to learn more.

Flagstar Wholesale Lendingwww.wholesale.flagstar.com

(866) [email protected]

For Licensed Mortgage Brokers in NY, NJ, CT, PA and FLNo HUD Approval Required – Live Help DeskWill Provide Training at Our Office or Yours48 Hour Underwriting - Get Paid Within 48 Hours of Funding

NATIONWIDE Equities

Nationwide Equities Corporation201-529-1401

www.nwecorp.com

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JANUARY 2012Monday-Friday, January 23-27

MISMO January 2012 Trimester Meeting

One Ocean Resort Hotel & Spa1 Ocean BoulevardAtlantic Beach, Fla.

For more information, call (800) 793-6222 or visit

MortgageBankers.org.

FEBRUARY 2012Sunday-Wednesday,

February 5-82012 CREF/Multifamily Housing

Convention & ExpoAtlanta Marriott Marquis

265 Peachtree Center AvenueAtlanta



Tuesday-Friday, February 21-24

The Mortgage BankersAssociation’s 2012 National

Mortgage Servicing Conference & Expo

Orlando World Center Marriott8701 World Center Drive

Orlando, Fla.For more information,

call (800) 793-6222 or visitMortgageBankers.org.

MARCH 2012Sunday-Thursday, March 11-1529th Annual Regional Conferenceof Mortgage Bankers AssociationsTrump Taj Mahal Casino Resort1000 Boardwalk at Virginia Avenue

Atlantic City, N.J.For more information,

call (732) 596-1619 or visit MBANJ.com.

Wednesday, March 14Florida Association of MortgageProfessionals Broward Chapter

2012 Annual Trade ShowBroward County Convention

Center1950 Eisenhower Boulevard

Ft. Lauderdale, Fla.For more information,

call (850) 942-6411 or visit FAMB.org.

Monday-Tuesday, March 19-20

2012 NAMB Legislative &Regulatory Conference Capitol Skyline Hotel

10 “I” Street SouthwestWashington, D.C.For information,

call (972) 758-1151, or visit NAMB.org/legconference.

Thursday, March 29Maryland Association of

Mortgage Professionals 2011March Mortgage Madness

ConventionMartin’s Crosswinds

7400 Greenway Center DriveGreenbelt, Md.

For information, call (410) 752-6262,

or visit MDMtgPros.org.

APRIL 2012Wednesday-Thursday,

April 18-192012 National Policy

ConferenceHyatt Regency on Capitol Hill

400 New Jersey Avenue NorthwestWashington, D.C.



To submit your entry for inclusion in the National Mortgage ProfessionalCalendar of Events, please e-mail the details of your event, along with

contact information, to [email protected].

Sunday-Wednesday,April 22-25

2012 National Technology inMortgage Banking Conference

& ExpoArizona Biltmore

2400 East Missouri AvenuePhoenix



Sunday-Wednesday, April 22-25

2012 National Fraud IssuesConference

Arizona Biltmore2400 East Missouri Avenue

PhoenixFor more information,

call (800) 793-6222 or visit MortgageBankers.org.

MAY 2012Sunday-Wednesday, May 6-9

2012 National Secondary MarketConference & Expo

New York Marriott Marquis1535 BroadwayNew York, N.Y.

For more information, call (800) 793-6222

or visit MortgageBankers.org.

Friday-Wednesday, May 18-232012 Mortgage Bankers

Association of Georgia EducationForum & Expo

Sandestin Hilton Golf Resort & Spa4000 South Sandestin Boulevard

Destin, Fla.For more information,

call (478) 743-8612 or visit MBAG.org.

Sunday-Wednesday, May 20-232012 Commercial/Multifamily

Servicing & TechnologyConference

Hilton Anatole2201 North Stemmons Freeway

DallasFor more information,


Sunday-Wednesday, May 20-232012 Legal Issues/Regulatory

Compliance ConferenceLa Quinta Resort & Club49-499 Eisenhower Drive

La Quinta, Calif.For more information, call (800)

793-6222 or visitMortgageBankers.org.

JUNE 2012Sunday-Wednesday, June 3-6Mortgage Bankers Association’s

2012 Chairman’s ConferenceThe Breakers

1 South County RoadPalm Beach, Fla.



OCTOBER 2012Sunday-Wednesday,

October 21-24Mortgage Bankers Association

99th Annual Convention & Expo

The Hyatt Regency151 East Wacker Drive

ChicagoFor more information,


• Daily updated mortgage industry news

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• Find loan programs

• Discover local and national events

• Get access to video

Looking for: TOP PRODUCERSCal l for Detai ls!

T he BEST B ranch Solu t ion, Period.

Nationwide FHA Lender

This information is provided to assist business professionals and is not an advertisement extended to the consumer,as defined by Section 226.2 of Regulation Z. Freedom Mortgage corporate office is located at: 907 Pleasant Valley Ave. Suite 3, Mount Laurel, NJ 08054. Lender NMLS ID: 2767. Licensed by the NJ Department of Banking and Insurance, License #9100861. All Rights Reserved. EOE

www.Fmbranch.com800.220.9498

[email protected]

Some restrictions may apply. All borrowers are subject to credit

approval. Programs subject to change. The information provided

herein is for dissemination to and for the use of real estate and

financial business entities only and is not an advertisement for

the extension of credit to consumers.

© 2011 Flagstar Bank

National Mortgage Professional Magazine - January 2012

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Transcript of National Mortgage Professional Magazine - January 2012