Mortgage Banker Magazine January 2021

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EDITORIALS / ARTICLES

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MORTGAGE BANKER | JANUARY 2021 3

January 2021 FEATURES 12

Treating a Nonbank Like a Bank: New Proposed Prudential Standards for Nonbank Mortgage Servicers LAURENCE E. PLATT AND CHRISTA L. BIEKER

Should U.S. state nonbank mortgage servicers be subject to “safety and soundness” standards of the type imposed by federal law on insured depository institutions, even though nonbanks do not solicit and hold customer funds in federally insured deposit accounts or pose a direct risk of a government bailout? Well, state mortgage banking regulators think so.

8

To Reduce Fraud Risk in 2021, Less is More, Thanks to Science The economic fallout of 2020’s pandemic brought historic unemployment levels that we expect will lead to an increase in mortgage fraud rates in 2021. Experts expect to see more income and employment misrepresentation, higher incidences of credit washing, and an emergence of synthetic identity schemes that could make fraud detection even harder next year..

FRANK MCKENNA

4 MORTGAGE BANKER | JANUARY 2021

20

A Powerful Resource for Lenders It is true. You don’t know what you don’t know, and that lack of knowledge can stand in the way of renters who aspire to become homeowners.

Pre-purchase counseling has been an instrumental resource that has made the dream of homeownership a reality for countless individuals and families.

REBECCA STEELE

30

34

If you’re tired of the burden of managing appraisals in-house when your processor’s focus would be allocated to moving loan files forward, then it might be time to outsource your appraisals to an appraisal management company (AMC).

However, the easy decision to outsource to a highly proficient AMC model is hardly comparable to deciding which AMC to use.

Based on the year we just experienced, I suspect the common phrase “hindsight is 2020” will become faux pas for a time. Kidding aside, there are significant takeaways from the dreadful pandemic year. Incredibly, even in 2020, many organizations were caught completely unprepared to handle the unintended byproducts of a pandemic situation and the need to go completely virtual or digital.

Eight Factors to Consider When Choosing an Appraisal

MATT HOLMES

Using Tech to Make a Difference in 2021

JODY COLLUP

Special

SECTIONS

12

REGULATORS AND AGENCIES

18

Will GSEs Exit Conservatorship This Year?

AN INTERVIEW WITH DR. MICHAEL STEGMAN

LOAN ORIGINATION

24

Surviving Mortgage Banking’s Perfect Storm: Providing Customer Satisfaction without Capsizing

BY RICH WEIDEL & PAUL VELEKEI

MORTGAGE SERVICING

27

Bracing for a Default Surge TERESA BLAKE

TECHNOLOGY

38

Mortgage Technology in 2021 and Beyond MICHAEL PERETZ

COMPLIANCE

40

Business as Usual: Compliance Challenges Ahead in 2021 FELECIA BOWERS

47

From the Desk of the Om-Bobs-man

LEGAL

50

The Mortgage Counselors

MITCH KIDER AND MICHAEL KIEVAL

27

THE C-SUITE

52 54

PROFILE:

Nancy Skinner PRESIDENT AND PARTNER A MORTGAGE BOUTIQUE

PROFILE:

Amit Haller COFOUNDER AND CEO REALI

Monthly

DEPARTMENTS

6 From the Editor 50 Mortgage Banking Lawyers 56 Data Download 58 Business Services Directory

40

BOB NIEMI

MORTGAGE BANKER | JANUARY 2021 5

MortgageBanker OUR MISSION Mortgage Banker magazine is dedicated to providing quality informational/educational content that betters the mortgage process at every step. The content is oriented to help professionals progress their understanding of the residential mortgage banking business and develop their skills at improving the efficiency and profitability at all levels.

VINCENT VALVO, CEO, Publisher & Editor-in-Chief vvalvo@ambizmedia.com ASSOCIATE PUBLISHER Beverly Bolnick bbolnick@ambizmedia.com FOUNDING PUBLISHER Ben Slayton BSlayton@twelve11media.com MANAGING EDITOR Brian Honea Brian@twelve11media.com SENIOR EDITOR Jill Emerson Jill@twelve11media.com ADVERTISING David Hoierman David@twelve11media.com PRODUCTION Henry Suchman Henry@twelve11media.com DIGITAL MEDIA Lucas Luna LLuna@twelve11media.com HEAD OF ENGAGEMENT AND OUTREACH Andrew Berman andrew@ambizmedia.com INTERACTIVE DESIGN DIRECTOR Alison Valvo avalvo@ambizmedia.com ONLINE CONTENT DIRECTOR Navindra Persaud npersaud@ambizmedia.com USER EXPERIENCE DESIGNER Billy Valvo bvalvo@ambizmedia.com

L ET T ER FR O M T H E EDI TO R

Unforseen Circumstances

T

o say 2020 was a crazy year would be an understatement. The last 12 months have included a global pandemic, widespread lockdowns, and massive job losses. Whoever said, “In retrospect, in 2015, not a single person got the answer right to the question ‘Where do you see yourself five years from now?’” hit the nail on the head.

But never mind five years. Following the lead of Steven Tyler who once sang that he couldn’t say where he’ll be in a year, I don’t think anybody a mere 12 months ago in January 2020 could have correctly predicted where they would be in January 2021.

We could not have predicted last January that we would be under new ownership, for one. American Business Media LLC acquired both Mortgage Banker Magazine and our sister publication, Mortgage Women Magazine, in December and we are really excited about working with our new partners.

Nor could we have forecasted that amid the pandemic that mortgage lenders would see origination volumes go through the roof as mortgage interest rates hit record lows.

In this issue, our expert contributors have taken their best shot at predicting what the mortgage landscape will be like in 2021 as far as origination, technology, compliance, and risk management, just to name a few.

What are you looking forward to the most in 2021? What challenges are facing your business as you begin the new year? We want to hear about your experiences. We are always listening. You can always drop us a line via the email address below.

MARKETING & EVENT ASSOCIATE Melissa Pianin mpianin@ambizmedia.com COLUMNISTS & CONTRIBUTING AUTHORS Christa Bieker Teresa Blake Felecia Bowers Jody Collup Matt Holmes

Mitch Kider Michael Kieval Bob Niemi Frank McKenna Michael Peretz

6 MORTGAGE BANKER | JANUARY 2021

Laurence Platt Rebecca Steele Paul Velekei Rich Weidel

B R I AN H O N E A

Managing Editor Editor@MortgageBankerMag.com

January 2021 AUTHORS Christa Bieker Christa L. Bieker is an associate in Mayer Brown’s Washington D.C. office and a member of the Consumer Financial Services group.

Teresa Blake Teresa Blake is a Principal in the KPMG Financial Services practice in Charlotte.

She is also the lead of the firm’s Lending Transformation capability.

Felicia Bowers

Jody Collup

Felecia Bowers has spent more than 40 years as a bank examiner and chief compliance officer, working specifically with mortgage bankers for over 35 years.

Jody Collup is a 13-year industry veteran who has worked in both the LOS and valuation tech spaces. She is currently the COO of Global DMS.

Matt Holmes Matt Holmes is a marketing specialist for Data Facts, an information services provider.

Frank McKenna Frank McKenna is co-founder and chief fraud strategist at Point Predictive, a San Diego-based provider of artificial intelligence solutions that detect fraud on loan applications.

Michael Peretz

Laurence Platt

Rebecca Steele

Paul Velekei

Rich Weidel

Michael Peretz has over 25 years of experience as an executive and consultant to the mortgage and financial services industries. He currently leads Capco’s Housing Finance domain.

Laurence E. Platt is a partner in Mayer Brown's Washington D.C. office and a member of the Financial Services Regulatory & Enforcement practice.

Rebecca Steele is the President and Chief Executive Officer of the National Foundation for Credit Counseling (NFCC), the nation’s largest and longest serving national network of nonprofit agencies providing HUD-approved housing counseling.

Paul Velekei is the Chief Technology Officer at Princeton Mortgage, an independent mortgage lender headquartered in New Jersey. Before his time at Princeton, Velekei worked for several hedge funds in NYC where he focused on fixed income products and related derivatives.

Rich Weidel is the CEO of Princeton Mortgage, founded in 1983 as a licensed mortgage banker and is backed by a 100+ year old multi-faceted real estate brokerage, investment, and insurance company.

MORTGAGE BANKER | JANUARY 2021 7

Q UA LITY CON T R O L & R I S K M A N AG EM EN T

Unlocking Risk Secrets TO REDUCE FRAUD LIKELIHOOD IN 2021, LESS IS MORE, THANKS TO SCIENCE

By FR ANK M CK ENNA , Point Predictive, Special to Mortgage Banker

T

he economic fallout of 2020’s pandemic brought historic unemployment levels that we expect will lead to an increase in mortgage fraud rates in 2021.

Experts expect to see more income and employment misrepresentation, higher incidences of credit washing, and an emergence of synthetic identity schemes that could make fraud detection even harder next year.

But as damaging as it is to lenders’ bottom lines, fraud itself may not actually be the industry’s biggest challenge. In a case of the cure being worse than the disease, current methods of detecting fraud may rival the impact of the original threat.

Perhaps the key to stopping more fraud is to do less work, not more. As fraud rises in the next 12 months, perhaps the answer is working smarter, not harder.

THE HIGH COST OF UNTARGETED FRAUD PREVENTION

Preventing mortgage fraud is extremely important to brokers, lenders, and servicers. But over the last 10 years, the process of identifying where to look for it has become increasingly difficult because new technologies are introduced to the masses and the fraudsters, corporate strategic priorities ebb and flow, and no process is ever 100 percent secure. In the effort to identify and prevent fraud in all forms, the industry has progressively layered more and more rigid policies and manual processes on top of a fluid problem space. This result is the industry looking for fraud everywhere, instead of better anticipating where it is likely to be.

Statistically, mortgage fraud is a relatively rare event, affecting only about 1 percent of loans in any given year. Yet current approaches to fraud prevention have buried underwriters under mountains of

8 MORTGAGE BANKER | JANUARY 2021

paperwork and third-party verification data. This ultimately burdens borrowers with lengthy, onerous loan processing and months of duplicative or unnecessary documentation and compliance checkboxes, while the rates of fraud detection are only marginally improved, at best.

This disruption comes at a high price.

In 2021, it will be more important than ever to explore reliable ways to accelerate the mortgage loan approval process while also improving our fraud detection abilities. To do this, lenders will need to focus on the top fraud prevention issues plaguing the industry: • The high rate of reviews and false positives that inundate underwriters and threaten the efficacy of the process of fraud prevention.

• Poor targeting of quality control (QC) measures due to the inability to know what is risky and what is not during the pre-funding portion of the process.

• Limited streamlining options for more effective routing and passing lower risk loans more quickly through the system.

Three Steps to Saving Time, Reducing Loss, and Accelerating Low-Risk Lending through Smarter Fraud Prevention My company, Point Predictive, analyzed more than 80 million loans that have contributed to its anti-fraud lending data consortium. Our analysis demonstrates the opportunity that lenders have in 2021 to improve operating results for their mortgage portfolios.

1. REDUCING FRAUD REVIEW RATES AND FALSE POSITIVES SAVES TIME

The most common types of fraud are misrepresentation (with income misrepresentation still the single most frequent type of mortgage fraud), early payment default, and repurchase risk. They drive far too many foreclosures and burden lenders with enormous financial loss. So, all the “i-dotting” and “t-crossing” that goes into preventing them is understandable.

In extensive data analysis with lenders, Point Predictive data scientists discovered that nearly half of all lenders saw up to 80 percent of their loans subject to some fraud flag or review process that required manual intervention. This high rate of review may be giving lenders a false sense of security.

High review rates result in expensive and

NEARLY HALF OF ALL LENDERS SAW UP TO

80%

OF THEIR LOANS SUBJECT TO SOME FRAUD FLAG OR REVIEW PROCESS THAT REQUIRED MANUAL INTERVENTION.

time-wasting misdirection of effort. We found that false positives can be as high as 1,000:1 (only one out of thousand actually indicates fraud) and can lead to legitimate risks being overlooked. To compound the issues, in many cases Point Predictive discovered that underwriters began to overlook the red flags when they became too commonplace. In this case, the more legitimate red flags underwriters must clear, the more likely they are to miss the true fraud when it is presented to them.

And lenders are already struggling with volume and speed. One of my colleagues is refinancing a home that he’s owned for 11 years. His package has been waiting on underwriting for nearly four weeks now.

Naturally, with issues like that plaguing the process for extremely low-risk loans, manual attention to flagged loans simply can’t scale. Burdensome review makes the underwriting process much more difficult and costly for lenders and consumers than it has to be. Fewer and more accurate alerts earlier in the loan process have

shown as much as 65 percent reduction in workload in underwriting and the prefunding QC, so this is an important area on which to focus.

2. USING DATA AND SCORING MODELS IN ADDITION TO ALERTS AND RULES-BASED MODELS PREVENTS MORE FRAUD MORE EFFICIENTLY

Is it possible to reduce the number of reviews and false positives and still feel confident that we can prevent fraud?

MORTGAGE BANKER | JANUARY 2021 9

With the right information, it’s not only possible, it’s far more efficient. And we can thank science for that, data science to be exact.

A study of alerts and rules, the most used fraud detection tools, showed that in isolation, they could be very poor predictors of risk. They have value, but the complex decisions behind assessing a loan for fraud requires more.

When used in conjunction with alerts and rules, multiple data points and interactions sourced from partners across the industry can more accurately dictate risk levels and provide a more comprehensive and trustworthy basis for how and where to focus your review efforts. Data points can include insights and patterns gleaned from statements on prior credit applications as well as third-party risk, such as geographic clusters of fraud and brokers or other entities associated with suspicious applications in the past.

This type of solution is conceptually easy to understand but very difficult to put into practice. It’s impossible for underwriters to efficiently wade through this volume of data and connect these dots manually.

Enter modern risk scoring technology, which can boil down this tsunami of data points into easily consumable scores that efficiently manage down risk.

Since fraud manifests itself in many ways, including borrower risk, property risk, broker risk, and even risk associated with the loan program, it is possible to individually evaluate the risk of those aspects

10 MORTGAGE BANKER | JANUARY 2021

of risk and take a more targeted approach that doesn’t involve subjecting every loan and everything in that loan to the same level of scrutiny. If the broker’s risk score indicates high risk, but the borrower is considered low risk, manual review activities can be focused on the risky aspects of the loan while the less risky aspects can receive a more appropriate and cost-effective treatment.

3. STREAMLINING LOW RISK MORTGAGES SAVES MONEY

With better fraud detection models and targeting of high risks before funding, lenders can save significantly by routing loans that score low for risk through more efficient processing channels.

Our data shows that only 10 percent of loans need to be subjected to the greatest scrutiny. The 30 to 50 percent of loans that have extremely low risk of fraud, early default, or repurchase (and which typically have a lower exposure) can be processed more economically by Level 1 underwriters who focus on compliance-based checks for half the cost of a senior underwriter. It doesn’t make sense to spend the same kind of time on a low-risk loan with an exposure in the hundreds as you would on a high-risk loan with a financial risk in the tens of thousands.

Risk factoring the workload in this way reduces underwriting costs by as much as $500-1,000 per loan. It can significantly improve operational efficiency and free up forensic review and quality control analysts to focus on the higher risk loans.

How significant is the impact of this approach to fraud risk management? For a lender with a monthly volume of 10,000 loans, the pool that can be streamlined would be 3,000 loans. Assuming a savings of $500 for each loan, this represents a monthly savings of $1,500,000 and an annual savings of $18 million.

FINDING BALANCE IN FRAUD PREVENTION

Before 2007, the mortgage industry was customer-focused, but the rise of fraud has driven lending toward an increasingly unwieldy compliance and fraud focus for 13 years now. Now that we’ve become aware of the underlying policy gaps that allowed fraud to flourish and gained new insights about the prevalence of different types of fraud, it’s time to stop treating all borrowers like they are criminals.

2021 is the year to shift to a balanced, sustainable mortgage lending approach that prioritizes customers while clamping down on fraud.

It comes as no surprise that unique approaches to data science will lead the way in transforming how the industry looks at fraud by greatly speeding up underwriting through a more comprehensive and concise understanding of risk.

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RE G U L ATO R S A N D AG E N C I E S

TREATING A NONBANK LIKE A BANK:

New Proposed Prudential Standards For Nonbank Mortgage Servicers

S

By L AU R ENCE E. PL AT T and CHRISTA L . B IEKER, M AYER B ROWN

hould U.S. state nonbank mortgage servicers be subject to “safety and soundness” standards of the type imposed by federal law on insured depository institutions, even though nonbanks do not solicit and hold customer funds in federally insured deposit accounts or pose a direct risk of a government bailout? Well, state mortgage banking regulators think so.

On September 29, 2020, the Conference of State Bank Supervisors (CSBS), an organization made up of state regulators, released proposed prudential standards for state oversight of nonbank mortgage servicers (the Proposal). CSBS pointed to a “changed nonbank mortgage market” as the driver of the proposed standards, emphasizing that nonbank mortgage servicers now service roughly 40 percent of the total single-family residential mortgage market.

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CSBS correctly noted in its Proposal that there are no uniform or comprehensive prudential standards that apply to nonbank mortgage servicers. Yet, there are numerous requirements that apply to nonbank mortgage servicers.

BACKGROUND

The Federal Housing Finance Agency (FHFA), as the conservator of Fannie Mae and Freddie Mac, has instituted minimum capital, net worth, and liquidity requirements, and Ginnie Mae also imposes financial strength requirements, but CSBS noted that these requirements do not apply across servicers’ entire portfolios. For example, FHFA requirements apply only to the portions of servicers’ portfolios that consist of Fannie Mae- and Freddie Macowned or -backed loans. The Proposal did not mention the fact that it is reported that third-party agency servicing presently comprises over 75 percent of the nonbank third-party servicing market. Plus, it did not highlight that the private investors on whose behalf nonbank mortgage services administer non-agency loans impose their own requirements as counterparties to their servicing agreements and are the ones most likely to bear the risk of loss on the serviced loans.

The idea of “prudential” standards generally is synonymous with “safety and soundness” standards. Section 39 of the Federal Deposit Insurance Act obligates the applicable federal banking agencies to prescribe for all insured depository institutions standards relating to, among others, internal controls, information systems, internal audit systems, and other operational and managerial standards as the November 9, 2020 applicable agency deems to be appropriate. The widely cited meaning of an “unsafe or unsound practice” is: An “unsafe or unsound practice” embraces any action, or lack of action, which is contrary to generally accepted standards of prudent operation, the possible consequences of which, if continued, would be abnormal risk or loss or damage to an institution, its shareholders, or the agencies administering the insurance funds.

Interestingly, the apparent purpose does not mention protecting bank customers, but, of course, safety and soundness stan-

dards, on one hand, and consumer protection requirements, on the other hand, are not mutually exclusive. Indeed, material, persistent violations of consumer protection-related laws and regulations could pose the very type of abnormal risk of loss that safety and soundness standards are designed to prevent. But managing legal risk is one small component of much more comprehensive safety and soundness standards that apply to insured depository institutions.

DESCRIPTION OF THE PROPOSAL

CSBS’ Proposal is designed to cover nonbank mortgage servicers and investors in mortgage servicing licensed by and operating in states, but it is not intended to apply to servicers solely owning and conducting reverse mortgage servicing, and it would have limited application to entities that only perform subservicing for others. CSBS does not have any regulatory authority to require mortgage servicers to follow these standards. Instead, CSBS suggests that state regulators adopt these standards by enacting laws or regulations or through other formal issuances. In many cases, the standards are somewhat vague, simply stating that a standard will align with a certain previously issued bulletin, and if states were to adopt these requirements, they may need to further develop the standards. As vague as the proposed standards may be under the Proposal, they essentially are a crude “cut and paste” of federal banking requirements. While it hasn’t done it in this case, CSBS has drafted model state laws in other areas.

CSBS explained that it has monitored nonbank servicers over the past several years and is concerned about the rapidgrowth of nonbank servicing and the financial stability and governance of nonbank servicers.

CSBS explained that it has monitored nonbank servicers over the past several years and is concerned about the rapid growth of nonbank servicing and the financial stability and governance of nonbank servicers. According to CSBS, the Proposal aims to provide protection for borrowers, investors, and other stakeholders; enhance regulatory oversight over nonbank servicers; and, improve

transparency, accountability, risk management, and corporate governance standards. The Proposal includes standards in the following areas:

CAPITAL REQUIREMENTS.

The Proposal includes minimum net worth and capital ratio requirements that track FHFA requirements. CSBS indicated, that by leveraging existing FHFA requirements, it hopes to lessen the regulatory burden on nonbank mortgage servicers. FHFA has released heightened standards that are not yet effective, and the Proposal requirements are designed to automatically adjust as FHFA’s requirements are modified.

Specifically, the Proposal would require nonbank mortgage servicers to maintain the higher of (1) $2.5 million net worth plus 25 basis points of owned unpaid principal balance for total 1 – 4 unit residential mortgage loans serviced or (2) FHFA eligibility requirements. CSBS noted that it would like interested parties to submit comments on whether “owned unpaid principal balanced” should include whole loans owned by the servicer or simply serviced on behalf of a whole third-party whole loan owner.

The minimum net worth requirements for subservicers that are not originators and do not own mortgage servicing rights or whole loans would be $2.5 million net worth without any additional amounts required for unpaid principal balance of subserviced loans.

With respect to capital requirements, nonbank mortgage servicers would be required to maintain the higher of (1) net worth / total assets > = 6 percent or (2) FHFA eligibility requirements.

If a servicer is required by Fannie Mae or Freddie Mac to maintain capital more than the FHFA’s minimum eligibility requirements, the Proposal would require the servicer to report that fact to state regulators.

LIQUIDITY REQUIREMENTS.

The liquidity requirements in the Proposal also track FHFA requirements. Under the Proposal, nonbank mortgage servicers would be required to maintain liquidity at an amount that is the higher of (1) 3.5 basis points of agency servicing unpaid

MORTGAGE BANKER | JANUARY 2021 13

principal balance plus non-agency servicing unpaid principal balance or (2) FHFA eligibility requirements.

CSBS explained that because servicing loans in forbearance, delinquency, or foreclosure imposes additional costs on servicers, the Proposal includes additional liquidity requirements for nonperforming loans that is the higher of (1) an incremental 200 basis points charge on non-performing loans for the portion of agency and non-agency non-performing loans greater than 6 percent of total servicing or (2) FHFA eligibility requirements.

In addition, the Proposal would require servicers to maintain sufficient allowable assets to cover normal operating expenses in addition to the amounts required for servicing expenses. Allowable assets include unrestricted cash and cash equivalents and unencumbered investment grade assets held for sale or trade. Allowable assets do not include unused or available portions of committed servicing advance lines of credit or other unused or available portions of credit lines such as normal operating business lines.

The Proposal does not detail how the amount necessary for operating expenses should be calculated, but it would require servicers to develop a written methodology for determining and maintaining sufficient operating liquidity and maintain certain policies, procedures, and plans related to operating liquidity.

If a servicer is required by Fannie Mae or Freddie Mac to maintain liquidity more than the FHFA’s minimum eligibility requirements, the Proposal would require the servicer to report that fact to state regulators.

RISK MANAGEMENT REQUIREMENTS.

Under the Proposal, nonbank mortgage servicers would be required to establish a risk management program under the oversight of the entity’s board of directors that manages risks in numerous areas including credit risk, liquidity risk, operational risk, market risk, compliance risk, and reputational risk.

DATA REQUIREMENTS.

The Proposal references RESPA’s Regulation X requirement that servicers main-

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tain documents and data in such a way that they are able to compile a servicing file within five days that includes transaction history information, a copy of the security instrument, notes reflecting communications with the borrower, data fields relating to the borrower’s loan, and copies of certain information or documents provided by the borrower to the servicer. This requirement already applies to most mortgage servicers, but, as CSBS notes, the requirement does not apply to small servicers, generally defined as servicers that service 5,000 or fewer mortgage loans for which the servicer is the creditor or assignee. CSBS proposed to apply this requirement more broadly to nonbank mortgage servicers.

If a servicer is required to maintain liquidity more than the FHFA’s minimum eligibility requirements, the Proposal would require the servicer to report that fact to state regulators.

DATA PROTECTION.

The standards address data protection and would require servicers to have controls related to the governance of information technology and perform risk assessments as well as testing and monitoring.

CORPORATE GOVERNANCE.

Under the Proposal, nonbank mortgage servicers must establish a corporate governance framework that protects the interests of the servicer and the servicer’s stakeholders.

SERVICING TRANSFER REQUIREMENTS.

To address what the CSBS described as

widespread data quality and integrity issues in the context of servicing transfers, the Proposal includes servicing transfer requirements that align with a 2014 CFPB bulletin on servicing transfers.

This bulletin largely provides additional guidance on compliance with a Regulation X requirement that servicers maintain certain policies and procedures and discusses how other consumer financial laws, including other Regulation X provisions, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, and the prohibition on unfair, deceptive, and abusive acts and practices, are relevant in the servicing transfer context. Each of these laws already applies to nonbank mortgage servicers under certain circumstances, and other than stating that the standards will “align” with this bulletin, the Proposal does not explain exactly how the standards would apply this guidance.

The Proposal also states that the servicing transfer requirements would align with a 2014 FHFA bulletin addressing servicing transfers.

CHANGE OF OWNERSHIP AND CONTROL REQUIREMENTS.

Under the Proposal, nonbank mortgage servicers would be required to provide 30 business days prior notice of a change in ownership of 10 percent of more of a mortgage servicer. The CSBS explained that the notice is designed to allow regulators to determine if additional information about a new owner is needed to evaluate whether the new owner has the financial and management capacity to operate the servicer. Note that many state licensing laws already require prior notice or prior approval of a change of control.

COMPLEX SERVICERS.

In addition to these requirements, the Proposal would apply enhanced standards to servicers that are deemed to be “Complex Servicers,” which are servicers that own whole loans plus servicing rights with aggregate unpaid principal balances totaling the lesser of $100 billion or representing at least 2.5 percent of the total market share.18 These servicers would be required to meet enhanced capital and liquidity standards that require the servicer’s management and board of directors to develop a methodology to determine and monitor its capital and liquidity needs. Complex Servicers would also be

required to engage in stress testing analysis and develop a “living will” that provides a roadmap to recovery should the servicer face significant hardship.

COMMENTARY

It’s hard to be opposed in theory to anything that is labeled as “prudential” or “safe and sound.” But the question is why should state-chartered, non-depository companies be subject to regulatory requirements that historically have been reserved for insured depository institutions? What the Proposal fails to do is describe in particularity why such standards are necessary for a non-depository.

There is no federal deposit insurance in play.

There is little likelihood of a direct government bailout of nonbank mortgage

servicers. Yet, there is little evidence that the failure of a nonbank mortgage servicer would have a material adverse impact on the larger economy. Why a state mortgage regulator should care about the fate of a private owner of a nonbank mortgage servicer is not at all clear and appears to go beyond their statutory authority. Consumer protection is the sweet spot of state regulation of mortgage servicers, but does achievement of that goal require the type and level of standards proposed here? At best, many of these broad standards have an attenuated relationship to consumer protection.

Certainly, requiring compliance management plans, much like the CFPB does, seems like a more targeted and effective approach that is consistent with their authority and likely to strengthen “safety

and soundness” without imposing prudential standards.

Moreover, these financial strength requirements could make it very difficult for smaller non-agency mortgage servicers to stay in the servicing game. The impact of these requirements on small businesses is an important consideration for further review.

If government regulators truly are concerned about the health and strength of nonbank mortgage servicers, perhaps they should consider providing lines of credit or advance lines to enable servicers to advance principal and interest to mortgage-backed securities holders and taxes and insurance to third parties in respect of mortgagor delinquencies.

MORTGAGE BANKER | JANUARY 2021 15

MortgageBanker Calendar of Events APRIL 2021

JUNE 2021

JULY 2021

Tuesday-Thursday, April 27-29 2021 Mid-Atlantic Regional Conference MBA/MW + MMBBA MGM National Harbor 101 MGM National Ave. Oxon Hill, Maryland MARCMBA.org

Thursday-Friday, June. 10-11 2021 New England Mortgage Expo Mohegan Sun Resort & Casino 1 Mohegan Sun Blvd.

Uncasville, Connecticut NEMortgageExpo.com

Tuesday, July 13 2020 Carolinas Connect Mortgage Expo Embassy Suites Hilton Charlotte 4800 South Tryon St. Charlotte, North Carolina CarolinasConnectMortgage.com

Tuesday, June 15, 2021 Great North West Mortgage Expo — Portland Holiday Inn Portland South 25425 SW 95th Ave., Wilsonville, OR 97070 www.greatnorthwestexpo.com

Thursday, July 22 2021 Arizona Mortgage Expo Wild Horse Pass Resort & Casino 5040 Wild Horse Pass Boulevard Chandler, AZ 85226 2021 Arizona Mortgage Expo www.azmortgageexpo.com

Tuesday, June 22 2021 Chicago Mortgage Originators Expo Holiday Inn Chicago SW 6201 Jollet Road Countryside, Illinois ChicagoOriginators.com

AUGUST 2021

Sunday-Thursday, April 11-15 2021 Regional Conference of Mortgage Banker Associations Hard Rock Hotel Casino 1000 Boardwalk Atlantic City, New Jersey mbanj.com

MAY 2021

Tuesday-Thursday, May 4-6 Mortgage Star Conference for Women Sheraton Memphis Downtown 250 N Main St, Memphis, TN 38103 www.mortgage-star.net Wednesday, May 5 Mid-South Mortgage Expo Sheraton Memphis Downtown 250 N Main St, Memphis, TN 38103 www.midsouthmortgageexpo.com

Thursday, June 3 2021 California Mortgage Expo— Irvine Hilton Irvine/Orange County Airport 18800 MacArthur Blvd.

Irvine, California CAMortgageExpo.com

Tuesday, July 6 2021 Ultimate Mortgage Expo Hotel Monteleone 214 Royal St New Orleans, LA 70130 www.ultimatemortgageexpo.com

Thursday, August 12 2021 California Mortgage Expo— San Diego Hyatt Regency La Jolla 3777 La Jolla Village Dr. San Diego, California CAMortgageExpo.com

Tuesday, May 11 2021 Motor City Mortgage Expo DoubleTree by Hilton Detroit— Dearborn 5801 Southfield Expressway Dearborn, Michigan MotorCityMortgageExpo.com Tuesday, May 18 Texas Mortgage Roundup – San Antonio Wyndham San Antonio Riverwalk, 111 E Pecan St San Antonio, TX txmortgageroundup.com

See www.mortgageconferences.com for more events.

To submit your entry for inclusion in the Mortgage Banker magazine calendar of events, please e-mail the details of your event, along with contact information, to editorial@ambizmedia.com.

All events are as of January 1, 2021 and are subject to change.

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MORTGAGE BANKER | JANUARY 2021 17

RE G U LATO R S A N D AG E N C I E S

The GSEs Won’t Escape Conservatorship This Year BIDEN ADMINISTRATION WON’T GIVE UP CONTROL OF HOUSING FINANCE DURING PERILOUS ECONOMY

By B RIA N HON EA

T

he once mighty GSEs were controversially forced into conservatorship by the FHFA in September 2008 amid the greatest housing crisis the country has ever seen.

The FHFA has now been operating the GSEs in conservatorship for a dozen years and the conservatorship remains just as controversial as it was in 2008 as Fannie Mae and Freddie Mac continue to turn profits. In the months leading up to the presidential election, rumors swirled regarding a possible exit from conservatorship in 2021, but just how likely is that?

Mortgage Banker recently spoke with Dr. Michael Stegman, Senior Fellow, Housing Finance Program, Center for Financial Markets at the Milken Institute and a former senior policy advisor for housing on the staff at the National Economic Council, and former counselor to the secretary of the Treasury for housing finance policy about that possibility.

DR. MICHAEL STEGMAN SENIOR FELLOW, HOUSING FINANCE PROGRAM, CENTER FOR FINANCIAL MARKETS AT THE MILKEN INSTITUTE

MB: What is the prospect of the GSEs exiting conservatorship in 2021?

STEGMAN: If there is not a premature release under a consent order before January 20, which I think would be a very big mistake, I am quite certain that the GSEs will still be in conservatorship by the end of 2021. Unlike the Trump administration, the Biden team will not see ending the conservatorships as a policy priority. They will take their time formulating their strategy for the future of the GSEs and the role government should play in a reformed housing finance system.

MB: There have also been rumors that the conservatorship will end in 2024. How would you address that?

STEGMAN: As I said, ending the conservatorship is not going to be a be all, end all policy goal of the Biden administration. It will be the natural outgrowth of a GSE reform strategy that I think ultimately will

18 MORTGAGE BANKER | JANUARY 2021

involve at least one more serious effort at bipartisan legislation to clean up what you can’t do administratively, such as an explicit paid-for federal guarantee of their MBS. To say 2024 is purely speculative, likely based on a combination of the time it would take for the GSEs to build capital to required levels, and more importantly, a recognition that the new administration has many other major crises to deal with before it turns to GSE reform. I can’t say if they are going to exit in 2024, but it’s certainly not going to be near term.

As I said, recapitalizing and releasing the GSEs is not a Biden administration policy goal. In terms of a timeline, I would think that they would want to keep the GSEs in conservatorship at least until we reach the other side of the pandemic to maximize their role in helping struggling families who are on the edge of eviction and losing their homes because of the pandemic.

Before settling in on a plan for the future, the team will take a real serious look at how the GSEs could improve racial eq-

uity and do more to help close the racial homeownership gap. Those are going to be far more important than putting a date certain on ending the conservatorships.

MB: What must happen for the conservatorship to end? There would seem to be more pressing matters to contend with in housing.

STEGMAN: There really are. When I look at 2021, there are several critical dates, none of which marks an exit. One is January 5, which will determine the Senate majority and which party controls which bills are brought to the floor for a vote. We have the Collins v. Mnuchin decision coming down from the Supreme Court, possibly in June, which will determine the administration’s options for changing the director and direction of FHFA. A third date I’m paying particular attention to, and I hope the administration will too, is Oct. 1, 2021. This is when the temporary 10 basis point addition to the GSEs’ guarantee fee on single family mortgages expires, which Congress imposed as pay-for for a two-month extension of a temporary payroll tax cut during the financial crisis a decade ago.

When that 10-basis point “mortgage tax”

expires, rather than reducing the g-fee, the $4-$5 billion in annual revenues it generates should be redirected to support affordable housing, and there needs to be a strategy for that. I think there is a way

of doing this without an act of Congress, but there is also a legislative opportunity there. These are all critical 2021 dates that are going to have significant effects on the future of the GSEs and the administration’s efforts to move the dial on black homeownership, racial equity, and more.

MB: How will the residential mortgage market be affected if the GSEs do not exit conservatorship this year?

STEGMAN: The market is working well now although credit is a little tighter and we expect to see low interest rates for some time because of the slowed economy and the effects of the pandemic. So, I wouldn’t expect any market disruptions from continuing conservatorships or from significantly extending the exit ramp. On the other hand, a premature exit, especially through a consent order before January 20th, could well cause chaos throughout the mortgage finance system. Given the serious macroeconomic challenges we face, it would be wrong for the outgoing administration to set the GSEs free as they head out the door after professing that exiting conservatorship will be based on milestones reached, and not the calendar. The public interest requires, and the Biden administration deserves, to have maximum policy room to address the serious housing challenges the nation confronts as we turn over a new year.

MORTGAGE BANKER | JANUARY 2021 19

LOA N O R I G I N ATI O N

I

Building Better Borrowers

WHY HOUSING COUNSELING IS AN UNDER-USED, BUT POWERFUL, TOOL FOR LENDERS

t is true. You don’t know what you don’t know, and that lack of knowledge can stand in the way of renters who aspire to become homeowners.

Pre-purchase counseling has been an instrumental resource that has made the dream of homeownership a reality for countless individuals and families.

As a result, counseled individuals who achieve their goal of homeownership are less likely to experience delinquency or foreclosure, accord-

By R EBECCA STEEL E, N F CC it exists. Worse, many have made a conscious decision not to enroll in a pre-purchase counseling program because of myths and misinformation they have heard from uninformed sources close to them.

HOPEFUL RENTERS

A 2016 survey conducted by the National Foundation for Credit Counseling (NFCC) found that 65 percent of renters hope to own a home in one to three years, yet many are held back due to perceived barriers based on misunderstandings or misinformation that could otherwise be addressed through interactions with a HUDcertified pre-purchase counselor. Consumer education programs supporting sustainable homeownership can only be successful if people know they exist, yet other studies have shown that many of those not participating were unaware that such counseling existed.

For those not familiar with the process, buying a home can be complicated and intimidating. But it doesn’t have to be. There are numerous trustworthy resources and organizations available to help navigate the complexities of buying a home. One just needs to know where to go and how to identify the right ones. A 2019 Fannie Mae survey indicated that 64 percent of young-

COUNSELED INDIVIDUALS WHO ACHIEVE THEIR GOAL OF HOMEOWNERSHIP ARE LESS LIKELY TO EXPERIENCE DELINQUENCY OR FORECLOSURE ing to research by the Department of Housing and Urban Development (HUD). Such an outcome is mutually beneficial for homeowners and lenders alike. The challenge is that while so many more could benefit from prepurchase counseling, they don’t know 20 MORTGAGE BANKER | JANUARY 2021

er homebuyers look to lenders for guidance related to the homebuying process. As the market increasingly depends on new generations of aspirational homeowners, lenders have a powerful resource to help fill the need for homebuyer education.

Working with a HUD-certified prepurchase counselor provides prospective homeowners with a significant advantage versus going it alone. By making the conscious decision to work with a HUD-certified counselor, the prospective homeowner enlists the aid of a subject matter expert who then acts as a coach. This coach then steers them through the minefield and potential pitfalls associated with buying a home. All the while taking the time to explain the process and connecting the prospective homeowner with invaluable resources that also offer the potential to reduce out-ofpocket expenses.

COUNSELING CREATES DEMAND

Further underscoring the benefits housing counseling provides to consumers and lenders, the HUD “PrePurchase Counseling Outcome Study” found that about one-third of the study participants had become homeowners 18 months after seeking pre-purchase counseling. This is very encouraging as low-to-median-income borrowers and first-time homebuyers are finding it particularly challenging to buy a home. These challenges are exacerbated by consumer misunderstandings related to down payment requirements: prospective homebuyers

MORTGAGE BANKER | JANUARY 2021 21

PRE-PURCHASE HOUSING COUNSELING AND HOUSING COUNSELING, IN GENERAL, DO NOT ONLY BENEFIT PROSPECTIVE HOMEBUYERS, BUT IT ALSO BENEFITS LENDERS AS WELL. think they need to put more down than lenders require, access to credit at reasonable rates to purchase a home can be a real hindrance for many, and the high levels of home price appreciation reduce home affordability making it more difficult for communities of color and first-time homebuyers to become homeowners.

Here is what we know. Homeownership has long been the primary asset-building mechanism in the U.S. economy. Unfortunately, a century of redlining, mortgage loan discrimina22 MORTGAGE BANKER | JANUARY 2021

tion, and preferential housing subsidies have created major barriers to homeownership for black Americans and communities of color. Black homeownership rates have declined to levels not seen since the 1960s. What this means is that a large and growing homeownership gap corresponds with the wealth gap. Understanding the relationship between wealth accumulation and homeownership shines a spotlight on the importance of leveraging those resources to level the playing field for all prospective homeowners. When utilized, HUD-certified pre-purchase counseling is the resource that serves this critical need. This is particularly true now given the situation brought about by the onset of COVID-19.

Although it may seem counter-intuitive, despite the financial turmoil currently occurring in the market place, for any buyer who has the financial means, an appropriate down payment, stable income, good credit, and looking to purchase an affordable property, now can be an ideal time to purchase a home. Feedback from counseling agencies from around the country indicates there are numerous “hot markets” evidenced by significant home buying activity across many income levels including the LMI segment.

ROBUST RESPONSE

This activity would likely be even more robust if more consumers took advantage of pre-purchase housing counseling. As was mentioned previously, some consumers don’t know housing counseling exists. Additionally, many consumers could either

qualify for a mortgage right now or would be qualifiable in a relatively short time if they just took the time to invest in themselves and their financial future by taking advantage of pre-purchase counseling. Here is the best part.

Pre-purchase housing counseling and housing counseling, in general, do not only benefit prospective homebuyers, but it also benefits lenders as well.

For example, through its Envisioning Homeownership Pre-purchase Counseling Program, the NFCC is working to create a pipeline of informed prospective homeowners that understand the home buying process, have realistic expectations of how much house they can afford, and have had their financials reviewed and organized to allow for more efficient underwriting by the lender.

Driving this process is a dedicated coach who walks consumers through extensive counseling that assesses their credit scores, maximum qualifying ratios, and residual income as methods for verifying consumer mortgage readiness. As part of the counseling process, each counselor develops a customized action plan for their client that addresses credit, savings, and debt management challenges. This comprehensive review enables clients to become adequately prepared for successful, long-term homeownership.

Ultimately, the knowledge gained through participation in the counseling process can create a more qualified borrower and a more financially resilient homeowner.

LOA N O R I G I N ATI O N

SURVIVING MORTGAGE BANKING’S PERFECT STORM:

Providing Customer Satisfaction Without Capsizing

I

By R ICH W EID EL and PAU L VEL EKEI, PRIN CETON M ORTG AG E

f there is any lesson that 2020 has taught us it is to expect the unexpected. COVID-19 was supposed to bring on another housing market crash, but it’s seen record-breaking growth since June after briefly put on hold during the outbreak of the pandemic this spring.

Despite looming economic uncertainty, highly controversial elections, and the aggravated spread of the pandemic, home buyers continue to quickly snatch up the relatively few homes listed for sale. Everything that was supposed to happen didn’t. So that makes things complicated when it comes to predicting what to expect in 2021 given that the dynamics remain complex.

Right now, the housing market is largely being driven by two factors: a shortage of available housing inventory and extremely low-interest rates. Double-digit annual growth in both list and sale prices show an extreme lack of inventory and incredible demand, a sign of a hot seller’s real estate market. Housing prices have surged to new records due to very strong demand, but low mortgage rates are helping buyers offset this increased cost.

Does this appetite give a clear indication of what we can expect in 2021? The year 2020 was the perfect storm for mortgage lending and anyone who has more answers than questions right now is in danger of flipping their boat. We are in unprecedented times. Unemployment is at record levels, the stock market is at record levels, and the housing market is at record levels. This situation is not supposed to happen. Yet, here we are. Macroeconomics drives the mortgage industry, and the future isn’t just complicated; it is complex.

There is a wide range of outcomes that can’t be predicted with certainty due to the underlying complexity.

If we step back and look at the overall market cycle, here is what typically happens. Eventually refinances will slow due to two factors: interest rates will rise and everyone will have already refinanced. Over the next two to three years, the average annual loan production will most likely be lower than in 2020.

The industry spent 2020 building fulfillment capacity at a

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dizzying speed. Once things slow, all that capacity won’t be needed. First, lenders will reduce margins to keep the production coming in, which drives profits down. Then the layoffs will happen because the industry will need to right size capacity (supply and demand). Interestingly, the decrease in lender margin will most likely drive another mini refinance boom.

WAIT FOR IT

So, the question keeping us up at night isn’t “what” will happen; history is a pretty good teacher. Rather, we’re thinking a lot about ‘when’ it will happen. Our ability to thrive in the mortgage business is contingent on our ability to master the market cycle. And the ‘experts’ are wrong as often as they are right.

One of the biggest unknowns going into 2021 is when interest rates will rise? After all, it’s what’s buoyed home buying and refinancings in the middle of a pandemic. So, what do the experts expect? Guidance from the Federal Reserve has the fed funds target rate remaining unchanged through 2021.

The most recent FOMC survey suggests the fed funds rate is unlikely to change through 2022 as well, with all but one expecting the median rate to remain at 0.125. The FOMC Dot Plot has one dissenting opinion with a 2022 year-end fund funds rate of 0.625 percent.

Bank consensus generally agrees we will have short end rates remaining low with a marginally steepening Treasury yield curve through 2H’21. Capital markets suggest the same: futures and overnight index swap levels remain stable with only moderate upticks through the end of 2021 before expectations rise in 2022. An article in USA Today back in December cited economic predictions that the low-interest rate environment is here to stay until 2024.

All of this considered, we are cautiously optimistic mortgage rates will continue to stay low and even slightly decrease in the short and medium-term. However, if current expectations hold true, as monetary policy and treasury markets take shape through the end of 2H’21, we expect to see an acceleration in the rise of mortgage rates. Here’s why we think

that. Given the industry dynamics and shifts over the course of 2020, we broadly expect this will compress margins and, overall, the mortgage rate environment will continue to stay favorable, as most economists are predicting the accommodative fed policy to remain intact past 2021.

In turn, this will produce continued refinance opportunities and sustain elevated volumes industry-wide. We believe the velocity of this compression occurs rather quickly and the industry overshoots the required margin level needed for profitability. At which point, an inflection point, in terms of rate levels, occurs as required margins build back into mortgage rates. We think this will happen prior to any fed funds or significant treasury rate move.

Another interesting trend to have emerged during 2020 was a broader acceptance of technology within the mortgage process; that is more of a willingness to adapt to technologies that already existed within our industry. Think remote online notarizations, e-closing, and virtual appraisals.

You could think that this would provide a platform to achieve a fundamental change in the mortgage process, but the reality is that it is still very much a right-

to-left process that is fundamentally unchanged over the last 20 years. Historically physical files would move from one department to the next: opening, processing, underwriting, closing, funding, post-closing. The industry still follows this same process, with the significant difference being that instead of physical files, we have digital files.

The promise of technology is an increase in productivity and a decrease in costs. Technology has not delivered these benefits across the industry... yet. Costs per funded loan are higher ($8,957 per loan in Q1 2018 vs. an average of $6,224 per loan from 2008-2018), and productivity per person has decreased over the last 20 years.

TECH’S A TEAM PLAYER

What we are learning is that technology isn’t the solution by itself. In fact, your systems architecture, your people, and your process along with your technology is what will ultimately drive success for mortgage lenders.

Our strategy is to give our customers what they want: a decrease in customer effort. Not through bolt-on technologies but our system architecture. To drive quality, productivity, and a decrease in costs (the holy grail of better, faster,

YOUR SYSTEMS ARCHITECTURE, YOUR PEOPLE, AND YOUR PROCESS ALONG WITH YOUR TECHNOLOGY IS WHAT WILL ULTIMATELY DRIVE SUCCESS FOR MORTGAGE LENDERS. cheaper), we are building bifurcated, parallel processes combined with AI-empowered technology to decrease the need for manual, assembly line processes. We’re only three years into our project and have grown from $5M per month to over $200M per month with a lifetime Net Promoter Score of 91 (top one percent in the industry according to NPS Benchmarks). In 2020, we’ve grown 200 percent, which we expect may have actually far outpaced growth in other parts of the mortgage industry.

The final question is regarding everyone’s preparedness in the instance of another economic tempest following the implementation of the COVID-19 vaccine. We may be able to contain the virus’ spread, but mortgage lenders must brace for the next perfect storm to stay self-righted.

By

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M O RTG AG E SE RVI C I N G

Bracing For A Default Surge

A

By T E RESA B L A KE, KPM G

s I write this article, COVID-19 cases in my home state of South Carolina are on the rise. My neighbor to the north, North Carolina, is experiencing the same fate and is closing some businesses.

I know many in this industry survived the crisis from 2008 – 2010. While I expect this moment in time may not be as bad as many fear, I do suspect that we will see a wave of borrowers who default. There are signs of hope but if those who remain unemployed since March 2020 can’t jump into a new career, a default wave is looming on the horizon.

CONTINUED ON NEXT PAGE

ALERT:

MORTGAGE PAST DUE

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DEFAULT TIDE RISING CONTINUED FROM PREVIOUS PAGE

The MBA’s third quarter report noted that forbearance loans remained flat at 5.54 percent. While this is a nice drop from 8.39 percent to 8.18 percent reported as of July 5, 2020, we still have a long way to go. In the summer of 2020, MBA reported that Fannie Mae and Freddie Mac loans dropped to 6.07 percent and Ginnie Mae dropped to 10.56 percent. While all these decreases are a good sign, the rise in COVID-19 cases makes many nervous that a default wave is coming.

WHAT IS DIFFERENT?

For starters, both Fannie Mae and Freddie Mac proposed forbearance programs that ultimately were included in the CARES Act. As a mortgage industry veteran, I am proud they got ahead of it and provided borrowers, who are temporarily impacted, with the ability to suspend payments until they get back on their feet. They can request up to 12 months of deferred payments which never existed during the Great Recession. In 2008, banks often went straight to foreclosure and it was not until much later that we saw short-sales and HARP. Mortgage rates continued their downward trend, with the 30-year fixed rate falling to 2.9 percent, another record low in the MBA’s survey and 63 basis points lower than the recent highs. The refinance share climbed to 72 percent of all origination activity, which shows

WITH OVER 34 MILLION STUDENT LOAN BORROWERS HAVING MISSED PAYMENTS IN THE SECOND AND THIRD QUARTERS, IT’S WORTH WATCHING IF THERE WILL BE AUXILIARY CONSEQUENCES FOR THE HOUSING AND MORTGAGE MARKETS IN THE COMING MONTHS. that borrowers are taking advantage of these historically low rates to bring their payment down. The 30-year fixed rate for FHA backed loans also moved to a new low to 2.97 percent which truly helps first time home buyers afford more in this market.

While the unemployment rate has dropped, it is still too high, at 6.7 percent at the end of November. Rates in some states are not moving down as fast. The MBA study said that more than 14.8 million people in the U.S. reported that they were unable to work because their employer closed or lost their business due to the pandemic. About 3.9 million people were not able to look for work due to the pandemic. While we are excited about the vaccine for COVID-19, we still have a long road ahead.

According to the MBA study, the proportion of student debt borrowers who missed a monthly payment has remained steady since May at around 40 percent. Student loan borrowers are more likely to have missed a rent or mortgage payment in the last six months; for instance, 10 percent of nonstudent loan borrower mortgagors have missed a mortgage payment since March, whereas over 20 percent of student loan borrower mortgagors have done so. With over 34 million student loan borrowers having missed payments in the second and third quarters, it’s worth watching if there will be auxiliary consequences for the housing and mortgage markets in the coming months.

HOW DOES TECHNOLOGY CHANGE THE GAME?

There are many more tools available today for lenders to leverage than ever. The digital revolution has provided low code or no code tools that make it possible to create a borrower portal for a forbearance application in five days. Bank websites also provide borrowers a significant amount of information about their options and can help guide them through the process. Banks have staffed up to ensure call centers have the capability to provide additional support to address issues technology can’t solve. The tools available in the call centers, like agent assist, also provide the agent options to lay out for the borrower.

While it may not prevent the default wave, it may prevent some from foreclosures. While I can’t personally change the course of this virus, I am hopeful we can help some borrowers from facing this horrible fate.

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M O RTG AG E O P E R ATI O N S

Eight Factors To Consider When Choosing An Appraisal Management Company

I

By M AT T HOL M ES, DATA FACTS

f you’re tired of the burden of managing appraisals in-house when your processor’s focus would be allocated to moving loan files forward, then it might be time to outsource your appraisals to an appraisal management company (AMC). However, the easy decision to outsource to a highly proficient AMC model is hardly comparable to deciding which AMC to use.

30 MORTGAGE BANKER | JANUARY 2021

In recent years, the path towards choosing the right AMC has changed quite a bit. Compliance has become an increasingly critical factor due to the rise in lending regulations nationally and locally. These regulations, not to mention the flurry of new GSE guidelines that have surfaced in the wake of COVID-19, have made it increasingly more difficult for lenders to perform in-house appraisals with complete confidence and at optimal speed.

So, what makes an AMC great? Let’s break down the top factors to consider when comparing AMCs.

1

INDUSTRY EXPERIENCE.

Of course, numbers do matter. You can’t deny the role experience plays in the effectiveness of your partnership. As a lender, you make a living balancing past data with future risks and quantifying the experience of a knowledgeable AMC management team is no exception. Ask yourself, what complex property specialties does this company have, what technical support is available, what geo-markets do they serve, and how long have they been delivering an outstanding AMC experience to their clients?

How many clients has the AMC served? What is their client retention rate? Are these clients like your business?

This is a key element to explore with each of the AMCs you examine, since it gives a major indication of how they manage clients with needs that are near-identical to yours.

2

SERVICES OFFERED.

When looking for the right AMC, think about the real-estate market your lending institution’s community base most often covers, alongside what expertise you don’t have from your in-house resources that would be welcome. Think about auditing demands. Do all your appraisal work meet the Uniform Standards of Professional Appraisal Practices (USPAP) standards? Are you able to gauge whether your panel of appraisers are operating in full compliance with state and national standards?

You’ll also want to ask yourself if the AMC is willing to work with the many existing appraiser relationships you’ve trusted over the years. Is the AMC’s panel of appraisers local, or is it spread about too thinly across your lending region?

3

ORDER MANAGEMENT TECHNOLOGY.

Be certain to research the AMC’s order management platform with a focus on ease of use, existing integrations to LOS/POS mortgage application systems, automation on selecting the most qualified, local appraiser, and its ability to provide detailed invoicing. In some lending organizations, the ability of the AMC’s technology to securely accept credit card payments is vital to the business model.

4

QUALITY APPRAISERS.

It’s important to know whether your AMC is truly bringing their a-game, and it starts with the appraisers on their panel. Ask the AMC about their appraiser vetting process, which procedures are followed, and what criteria is used to vet them. Verify whether appraisers are checked with individual state licensing authority, the Appraisal Subcommittee (ASC), the Appraisal Qualification Board (AQB), or the FHA Roster to determine their active status and any potential disciplinary proceedings.

5

APPRAISER PAYMENT.

The Dodd Frank Act mandates that appraisal fees must be disclosed on the final loan estimate. It also requires that lenders compensate appraisers fairly based on the geographical market and complexity of property.

Be sure to investigate the fees paid and appraiser payment processes for each AMC. Does the AMC offer prorated “customary and reasonable” fees as part of the solution, or do they take a more case-by-case approach, “shopping” your assignment for every order they receive? Neither of these options is inherently right or wrong, but it’s important to determine the most cost-effective option for alignment with your operational expectations.

6

AGILITY.

Staying on top of regulations in today’s lending landscape isn’t just preferable, it’s imperative and lenders know it. Now more than ever before, AMCs need to be on top of their processes regardless of what the market throws at them. A great example of this is how AMCs reacted to the mandates set by Fannie and Freddie during the COVID-19 pandemic. For example, at the onset of the GSE regulations concerning modified interior inspection guidance, Data Facts recognized the urgency, and adapted their processes in just a few days.

You should also keep in mind that having an AMC that can quickly scale seasonally and in response to low rates is vitally important. Simply put, lenders can’t afford delays, especially during times of great volume.

MORTGAGE BANKER | JANUARY 2021 31

7

A FOCUS ON COMPLIANCE.

Without a doubt, compliance is a critical factor to weigh when considering an AMC. Non-compliance is the fastest way to put an AMC out of business, and the fallout can have a devastating impact on the lender.

8

CUSTOMER SERVICE.

Does the AMC employ an in-house compliance officer, or do they outsource to a vendor? The AMC should disclose information about this executive or vendor, including their responsibilities with regards to identifying and interpreting state licensing regulations, appraiser independence rules, and the Uniform Standards of Professional Appraisal Practices.

Your lending institution needs to solve a problem with an appraisal or to discuss how best to handle a unique property, and it’s up to your AMC to properly advise you on that problem. If you’re constantly weaving through a maze of automated call centers without talking to a human, are you seamlessly addressing the problem? Do your research upfront and evaluate how the AMC support staff, chief appraiser, and their written or verbal expertise covers their overall business practices and industry knowledge. Is this information accurate and, more importantly, helpful in supporting your communication of a resolution to any issue with the borrower or a concerned realtor?

The AMC should be able to show exactly how it manages its licensing requirements for each state in which it operates. It should monitor state regulations for implementation of AMC licensing requirements and have a clearly defined process for maintaining active licensing.

Once past the consideration stage, take note of the everyday interactions you have with the AMC. Do they frequently communicate product and regulatory updates?

What about the billing process? Is it straightforward or bogged down?

In addition to these compliance considerations, those involved with placing or reviewing appraisal orders should be required to take and pass a current USPAP course every two years.

Most importantly, your AMC should feel like part of your team. Doing business with an AMC should feel like having a close division of your company strictly dedicated to appraisals. Once your interactions become second nature, and you’ve gained a sense of trust and honesty with your AMC, chances are you’ve found a partner worthy of a long-term relationship.

DOING BUSINESS WITH AN AMC SHOULD FEEL LIKE HAVING A CLOSE DIVISION OF YOUR COMPANY STRICTLY DEDICATED TO APPRAISALS.

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✓ Monthly Economic and Finance Forecasts

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USING T MAKE A DIFF

B

ased on the year we just experienced, I suspect the common phrase “hindsight is 2020” will become faux pas for a time. Kidding aside, there are significant takeaways from the dreadful pandemic year. Incredibly, even in 2020, many organizations were caught completely unprepared to handle the unintended byproducts of a pandemic situation and the need to go completely virtual or digital. Among the hardships that abounded, there were some good consequences, but still those good things caused extreme frustration and struggles in most organizations for a variety of reasons. I am speaking, of course, the lowered interest rates and the steep incline and year-long steady hold of the refi market.

It is ironic that out of a terrible situa34 MORTGAGE BANKER | JANUARY 2021

By J O DY COL LU P, G LOB A L D M S tion also came a boom for the mortgage industry. Interestingly enough, that very gift caused extreme discomfort with present processes and workflows resulting in long delays and extended loan closures. One of the primary reasons this occurred is the utilization of the same processes and technology that was in place years ago. This can be said of just about every component of the loan process, but it became obvious to all, including borrowers, when it was time for the collateralization of the loan. The sheer numbers of appraisal orders were almost too much for most organizations to manage in a timely manner.

STILL BEHIND

As I’m considering my next thought, I’m literally shaking my head, because here we are in 2021 and yet there are still numerous manual processes coupled with emails and spreadsheets being used to manage entire lines of business. Organizations justify this because

‘it is how they’ve always functioned’ or their need for manual control supersedes the desire for automated efficiencies or outright fear of change. What is truly sad about this is that technology is ever evolving and is easier and easier to manage, even for us slightly older than the millennial age group. I am hopeful organizations that were plowed under the last year with high volumes take the time to consider how they can utilize technology to make their workflows more efficient and thereby increasing their profitability. While this is true for each of the numerus processes needed to complete a loan, let’s focus on the appraisal process specifically.

Real estate appraisal technology is one of the most competitive segments within the mortgage space offering numerous options to consider with vast differences in innovation available.

Some platforms in the space are ‘forms only’ applications, some are basic appraisal ordering systems with limited

TECH TO FERENCE IN

management functionality, some systems competed quite nicely years ago, and a couple compete at the very top level today. For those who are interested in utilizing the best-of-the best, or most innovative products available, I imagine your question is, “how do I know what is actually innovative and what is really just a standard offering available in most platforms?”

It’s a good question and it gets tougher by the day to discern what is just ‘marketing spin’ and what seems like it might be innovative but is just old hat. Some of you might be thinking you don’t necessarily need the most innovative solution, but you are interested in using technology to shorten cycles and ultimately create more profitability for your organization. Innovation is precisely the thing that delivers that particular wish list item. Now that we have established that, what you need now, are the questions to ask yourself and questions you should ask

of your prospective tech providers as well as types of feature sets to look for.

Take a moment to list just the top five things that caused so much stress for your team when volumes hit a feverish peak last summer. What antiquated processes can you kick to the curb? The most obvious question but least likely to be asked is, “if I could start from scratch, what would my most optimal process look like?”

SAME OLD, SAME OLD

If I shared that almost 90 percent of organizations seeking change through technology literally try and mimic exactly what they used to do in their old system using their old processes, would you be surprised? Don’t be, because it’s true. We find time after time, when we ask a new client how they would like their appraisal process to flow, they literally have no idea, and they must spend time mapping out what their process should look like be-

fore we can begin their implementation cycle. No wonder most appraisal processes are a little inefficient…

When you are engaging in an implementation cycle for any new technology, ask your provider what the best practices are. They should know how to guide you, and if they do not, run away. Can you be up and running in days, not months? Yes, you can if you select the right provider. Even some of the most complicated workflows can be implemented rather quickly if the software is nimble enough. I’m getting ahead of myself though, far before you implement, you need to interview providers and decide which is best for you. Make sure you inquire about what recent improvements they have deployed. What is it that makes them proud of their offering? What makes them stand out from their competitors? What problems can they solve for you? I find that basic interview-style questions are rarely asked, rather MORTGAGE BANKER | JANUARY 2021 35

The most innovative systems offer sophisticated decisioning algorithms that fire unlimited if/then sets of parameters that will literally operate the way a traditional manual assignment by a human would, only more accurately and much faster. folks assume that all platforms are the same, which is incorrect.

Does the platform look like a standard printed out form superimposed on the computer screen? Most everything did until recently, but there’s more intuitive user experiences available. These newer user interfaces not only look better, but they also facilitate better performance across the variety of roles within your department. Not everyone needs to see everything all at once all the time. User role-based designs ensure that individual staff members see what is most urgent in their individual workflow in real time.

Always ensure that your system prop-

36 MORTGAGE BANKER | JANUARY 2021

erly manages ECOA as many fall short.

Inquire if your provider offers a compliance guarantee backed by insurance.

Hardly any do.

Does the system allow you to configure changes on the fly? Can you add fields or forms as you need them in real time? Or do you have to order custom work from a support group or a development team? When you make any additions or tweaks, are they immediately reportable? Speaking of reporting, does the system offer real-time intuitive reporting features as well as automated scheduling and delivery? Does the system offer an accurate QA tool? If so, does it come

standard or does it cost more?

I encourage you to embrace automation. Gaining efficiencies through proper automation does not mean you give up control. Quite the opposite is true. The most innovative systems offer sophisticated decisioning algorithms that fire unlimited if/then sets of parameters that will literally operate the way a traditional manual assignment by a human would, only more accurately and much faster. Your appraisal technology should allow you to utilize this type of tool to ensure you have the best appraiser selected for each order and each subsequent appraisal review.

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TO BED

MORTGAGE TECHNOLOGY IN 2021 AND BEYOND

By M I C H A E L P E R ETZ , CA PCO

38 MORTGAGE BANKER | JANUARY 2021

L

ast year, the year of COVID and incredibly low interest rates, bolstered the concept that mortgage originators must be able to capitalize on market conditions very quickly. No single action can better prepare originators than improvements to their technology, specifically the speed at which an originator can manufacture a loan.

Seemingly a lifetime ago (February 2018), the New York Federal Reserve mentioned that “FinTech lenders adjust supply more elastically than other lenders….” This statement helps to form the conundrum that even the best traditional mortgage lenders find themselves in as they plan for 2021 and beyond. How does my organization react like a Fintech, provide white-glove service levels, and do both at a respectable profit?

While the answers are far from sim-

ple, a formula for success exists. Originators must first look at their existing processes at a granular a level as possible.

What do your existing technologies and people do? How do they do it? How well do they do it?

How much time does it take?

Finally, what are my company’s bench marks for all of those questions? Once those questions are answered, an originator can focus on specific problem areas.

HAPPY PATH Next, build the best process.

Sounds too simple, but it is imperative that technology or resource changes be dependent on an optimized process flow. An optimized process flow includes the “happy path” as well as the

contingent paths. It includes automated and manual controls. It shows the path of critical data elements and is understood by all key stakeholders, which becomes the sole source of truth as you look for technology to help solve inefficiencies.

Third, consider existing internal and external technologies that you are already using. How can those resources be better utilized? Great examples of this include maximizing the use of Freddie Mac’s Loan Advisor and Fannie Mae’s Mortgage Technology Platform. When Capco works with originators, we often see these products being underutilized. Maximizing your existing technology stack and taking advantage of the strong GSE

offerings is the best step to take before heading to the market for additional technology solutions.

Cast a broad net when looking for technology solutions. Discuss what has worked or not worked with industry peers. Many times, originators are pressed for time or feel compelled to use an incomplete solution.

The time spent looking for, and potentially integrating multiple solutions, is worth it. Getting a working team from your organization to consider the costs both short and long-term, compliance, ROI, technology impact, potential obsolescence and many other factors will assure your organization has made the right technology solutions, both large and small. MB

MORTGAGE BANKER | JANUARY 2021 39

CO M P LI A N C E

NEW CHALLENGES AHEAD IN 2021

By FEL ECIA B O W ER S , H OM EOWN ERS F IN A N CIA L G ROU P

M

y original thought was to recap 2020 before launching into speculation of what 2021 will hold for compliance professionals. I am confident that the events of 2020 will be forever etched into our memory banks and no one wants or needs a recap.

Some things remained steady through 2020, including challenges relative to the constitutionality of the CFPB, payday rule, and privacy laws on federal and state levels, and we saw new definitions of what is considered non-public information. In the last two years, we saw an uptick in enforcement actions and the expansion of enforcement actions for redlining extending to a nonbank mortgage lender affiliate of real estate brokerage firms. I like the idea that CFPB issues are being resolved via supervisory actions, which focus on changing the behavior with oversight and supervision versus enforcement

40 MORTGAGE BANKER | JANUARY 2021

actions and fines. Compliance professionals should ensure that a review of any supervisory action is included in your periodic quiet reading time. If the issue does not fit within your organization right now, it may later. Who knows if the situation may impact your organization in the future? Or, is there a way someone within your organization could be guilty of committing the same protocol violation now thinking they will not get caught?

STATES’ RIGHTS

While the CFPB undergoes changes and possibly a refocus of their energy, we can expect the individual states to maintain or even ramp up their exam processes. NY, MA, NJ, PA, and CA have launched a mini version of the CFPB designed to pick up the slack in areas they perceive the CFPB is not being proactive. The states will establish their own definition of what

is or is not proactive enough. As I write this, I have six individual state exams in process. Each one is obviously different as to its depth and focus.

Did anyone realize that Employee Earned Wage Access (EWA) programs were under scrutiny by the CFPB? I know I missed this one. EWA programs allow employees to access wages they have already worked for and accrued but have not been paid.

The CFPB issued an Advisory Opinion on this subject on November 30,2020.

Timing was probably not fortuitous given the global impact of COVID on companies. The opinion will impact your program depending on how your program works; for example, if the employee handles repayment via monthly payments, you may have to provide Regulation Z type disclosures.

It is an interesting reading assignment.

LIBOR sunsets by December 31, 2021 and by now, if you are still

offering LIBOR products in your adjustable-rate menu, you should have transitioned to the alternative language promissory note and documents during Q2 2020. A joint statement issued November 30, 2020 encouraged banks to stop engaging in new contracts using LIBOR as soon as possible but no later than the December 31, 2021 deadline. Failure to stop would create a safety and soundness issue for your organization. That is one heck of an incentive to stop.

The CFPB announced on August 20, 2020 that it will provide an additional 60 days for public comment on its Request for Information (RFI) on how best to create a regulatory environment that expands access to credit and ensures that all consumers and communities are protected from discrimination in all aspects of a credit transaction. The comment period ended December 1, 2020, so we can expect more guidance on this subject mid-2021, hopefully. The RFI should trigger lenders to re-evaluate their organizations globally for ECOA and fair lending current practices and ways they can improve balancing the ATR/ AM Guidance from October 2020: • How diverse is your hiring practices?

• Have you introduced limited English proficiency options for consumers, such as pertinent disclosures in foreign languages?

• Make sure you are analyzing your HMDA data on a periodic basis. Periodic being judgmental but with sufficient frequency

to ensure you are monitoring compliance and activity.

• With DACA applications and renewals re-opening, we can expect an uptick in applications albeit it somewhat subdued primarily due to COVID. Requests for financing might increase too.

As of August 20,2020, DACA recipients were still ineligible for FHA loans, but there may be other programs available. Do you have programs available for this group of individuals?

• There is speculation that the incoming leadership will focus on racial equities and social injustice during COVID which means your HMDA data, loan program menu, and outreach activities will be scrutinized for overt discrimination, disparate impact, redlining and racial biases.

For instance, did you shrink your menu of loan programs during COVID? Were the programs you discontinued inadvertently impact a protected class of individuals?

COMPUTERIZED CREDIT

Artificial intelligence (AI) is garnering more interest in our industry with speculation that the incoming administration will be very sensitive and interested in the role it plays in access to credit. The leading question is whether AI increases discrimination through its reliance on large data bases and does that data contain outdated or predetermined biases. Think about this for a second. Most of the data

that goes into these programs is proprietary; therefore, we really do not know how the calculations and ratings are determined. The programs in use have policies and procedures stating they are unbiased as to discriminatory factors such as race, sex, and ethnicity but can we be sure? We do know that the creators of the AI underwriting programs in use today stipulate that their programs are to be used to “compliment” the underwriting process, which puts the onus back on the lender to make the final decision, and it emphasizes the importance of your manual second look program and lends favorably to developing programs designed around alternative credit histories.

I may be in the minority, but I do hope 2021 ushers in increased scrutiny on cryptocurrency, cybercrimes, and regulations. Last week I received, through my work email, a ransom demand for a large amount of bitcoin to be deposited into a specific account or the sender was going to release my internet search and viewing activities to my employer and social media. Let me first state I do not use my company computer to handle personal internet business. Second, I did not realize that shopping for flannel sheets online was a nefarious activity. The sender did not receive his ransom and I am waiting for social media opinions on the set of sheets I bought.

Have you taken advantage of any of the recent webinars on lending to employees who derive their income from the marijuana industry, doing business with this industry, or even

Artificial intelligence (AI) is garnering more interest in our industry with speculation that the incoming administration will be very sensitive and interested in the role it plays in access to credit.

MORTGAGE BANKER | JANUARY 2021 41

AI RESHAPING CREDIT ACCESS CONTINUED FROM PREVIOUS PAGE

lending to businesses in this industry?

You should. It is enlightening (no pun intended). There are approximately 35 states allowing medicinal usage and another 15 states allowing recreational usage. The incoming VP has opined that they will consider decriminalizing marijuana usage and expunge the records of those individuals convicted of illegal marijuana activity. If this happens, how will these changes impact your hiring practices? Your background check procedures? Your lending documentation and ability-torepay requirement? The Safe Banking Act may open the door to permit mainstream banking of marijuana business too. Many, many years ago we had a customer shove thousands of dollars through the tiny little deposit slot on the ATM machine on a Saturday night. When the bank branch opened on Monday morning, it wreaked of

marijuana and we had to call the local police. They confiscated the deposited funds and paid a visit to the customer who made that deposit. It took months for the smell to go away and the customer jokes were plenty with the favorite being we did not provide enough donuts. We still do not know how he was able to force that thick envelope through the tiny slot.

On the agenda for 2021 is a set of uniform settlement agent closing instructions. Face it, we need this.

Right now, a set of lenders instructions to a settlement agent ranges from a few pages to 20-plus pages. TRID modified our delivery of these instructions from a few days prior to consummation to the date and possibly hours prior to consummation. If the transaction is a purchase transaction, the settlement agent may be new to the lender and not familiar with their closing package,

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complicating the ability to comply with the instructions due to a lack of time to thoroughly read them. Defects are costly due to bad customer service, financial mistakes, buy-backs, or nonsaleable loans, etc. Non-compliance is costly too. When was the last time compliance professionals read through a completed set of lender’s instructions your company uses? The industry tried to establish uniform instructions many years ago without success. I hope these get through the process and it seems to have a lot of backing.

Servicing issues will be prominent through 2021, especially if COVID persists. On December 7, 2020, the CFPB, a multistate group of state attorney generals, and bank regulators filed a complaint against a major servicing entity alleging multiple consumer financial law violations relative to the servicing of loans.

The order consisted of $73 million in redress to over 40,000 impacted customers as well as a $1.5 million penalty to the CFPB. In addition to the standard requirements of RESPA, TILA and state rules, there are interim protocols in place under the CARES Act that impact the collection and servicing activities for delinquent borrowers.

COVID caused many of us to refocus our operations and even engage third party vendors for some of the standard operational activities such as processing or underwriting.

For many, outsourcing these activities was a new adventure and created new challenges for our third-party vendor management program. Outsourced and offshore vendors require tailored and unique protocols: • Security of data • Security protocols if you allow them access to your systems • Privacy • Liability insurance coverage • Service level expectations and how to measure these expectations • Legal jurisdiction especially when dealing with offshore enterprises • On-site visits are not available right now with COVID restrictions. How do you legitimize the operations?

• And remember, licensing may be required if the vendor is performing processing or underwriting services. Be sure to read the S.A.F.E. Act. Suffice it to say, 2021 will be full of compliance challenges for our industry with many of them contingent on the new administration heading to the White House. In other words, business as usual. Remain flexible, informed, and alert as things could get interesting.

MORTGAGE BANKER | JANUARY 2021 43

CO M P LI A N C E

REGULATORY CORNER FEDERAL COMPLIANCE

NATIONSTAR MORTGAGE SETTLES WITH CFPB AND STATES

The CFPB recently announced it has filed a complaint and proposed stipulated judgment and order against Nationstar Mortgage, LLC, which does business as Mr. Cooper. The Bureau’s action is part of a coordinated effort between the Bureau, a multistate group of state attorneys general, and state bank regulators.

Nationstar is one of the nation’s largest mortgage servicers and the largest non-bank mortgage servicer in the United States. The Bureau alleges that Nationstar violated multiple federal consumer financial laws, causing substantial harm to the borrowers whose mortgage loans it serviced, including distressed homeowners. In its complaint, the Bureau alleges that Nationstar engaged in unfair and deceptive acts and practices in violation of the Consumer Financial Protection Act of 2010, violated the Real Estate Settlement Procedures Act, and violated the Homeowner’s Protection Act of 1998.

NMLS ANNUAL CONFERENCE

Registration for the 2021 NMLS Annual Conference & Training is now open. It will be held online from February 23-26, 2021, 1:00-5:00 p.m. ET.

2019 CRA DATA AVAILABLE

The OCC, FRB, and FDIC have jointly announced on December 14, 2020, the availability of data on small business, small farm, and community development lending reported by certain commercial banks and savings associations, in accordance with the CRA. An FFIEC disclosure statement on the reported 2019 CRA data, in electronic form, is available for each reporting commercial bank and savings association.

The FFIEC also prepared aggregate disclosure statements of small business and small farm lending for all the metropolitan statistical areas and non-metropolitan counties in the U.S. and its territories. These statements are available for public inspection on the FFIEC website.

44 MORTGAGE BANKER | JANUARY 2021

MORTGAGE DATA ANALYTICS COMPANY SETTLES FTC ALLEGATIONS

The FTC announced on December 15, 2020 a mortgage industry data analytics company will be required to implement a comprehensive data security program as part of a settlement resolving Federal Trade Commission allegations that the firm failed to ensure one of its vendors was adequately securing personal data about tens of thousands of mortgage holders. The complaint filed by the FTC alleged that Texas-based Ascension Data & Analytics, LLC violated the Gramm-Leach Bliley Act’s Safeguard Rule, which requires financial institutions to develop, implement, and maintain a comprehensive information security program.

As part of that program, financial institutions must oversee their third-party vendors, by ensuring they can implement and maintain appropriate safeguards for customer information and requiring them to do so by contract.

The FTC alleged that a vendor, OpticsML, which Ascension hired to perform text recognition scanning on mortgage documents, stored the contents of the documents on a cloud-based server in plain text, without any protections to block unauthorized access, such as requiring a password or encrypting the information.

The documents contained sensitive information about mortgage holders and others, such as names, dates of birth, Social Security numbers, loan information, credit and debit account numbers, drivers’ license numbers, or credit files. As a result of the inadequate security, the cloud-based server containing the mortgage data was accessed dozens of times.

HMDA ASSET-SIZE EXEMPTION THRESHOLD ADJUSTMENT

The CFPB published in the December 22, 2020, Federal Register a final rule adjusting the Regulation C (HMDA) asset-size exemption threshold for banks, savings associations, and credit unions for inflation. For calendar year 2021, that threshold is increased from $47 million to $48 million. Therefore, banks, savings associations, and credit unions with assets of $48 million or less as of December 31, 2020, are exempt from collecting HMDA data in 2021.

CFPB ADJUSTS SMALL-CREDITOR ASSET THRESHOLD FOR ESCROW EXEMPTION

The CFPB published in the December 22, 2020, Federal Register a final rule making an inflation adjustment to the asset-size threshold for certain creditors to qualify for an exemption to the requirement to establish an escrow account for a higher-priced mortgage loan under section 1026.35 of Regulation Z. The threshold is adjusted, effective January 1, 2021, to $2,230 billion from $2.202 billion. Therefore, creditors with assets of less than $2.230 billion (including assets of certain affiliates) as of December 31, 2020, will be exempt, if other requirements of section 1026.35(b)(2)(iii) of Regulation Z also are met, from establishing escrow accounts for higher-priced mortgage loans in 2021. The change is effective January 1, 2021.

MORTGAGE BANKER | JANUARY 2021 45

MORTGAGE SERVICER SETTLES WITH CFPB

The CFPB issued a consent order against Seterus, Inc. and Kyanite Services, Inc., as Seterus’s successor in interest, based on the CFPB’s finding that Seterus violated the Consumer Financial Protection Act of 2010 (CFPA) and Regulation X. The CFPB found that Seterus’s actions resulted in delaying or depriving some borrowers of a reasonable opportunity to get their loss mitigation applications completed and evaluated and in some borrowers' failing to timely receive protections against prohibited foreclosure activities to which they were legally entitled.

The order requires Kyanite to pay $4,932,525 in total redress to approximately 11,866 of the consumers to whom Seterus sent a defective acknowledgment notice. The order also imposes a $500,000 civil money penalty and includes injunctive relief that would apply in the event Kyanite engages in mortgage servicing. At its height, Seterus, a former mortgage servicer based in North Carolina, serviced approximately 500,000 residential mortgage loans.

Seterus is no longer operating. On February 28, 2019, after the relevant period covered by the CFPB’s investigation, Seterus was sold and its entire mortgage servicing portfolio was transferred to Nationstar Mortgage LLC, doing business as Mr. Cooper, with which the CFPB reached a separate settlement earlier this month.

CFPB: SECOND PIECE OF FDCPA FINAL RULE ISSUED

On December 18, 2020, the CFPB announced a final rule to implement Fair Debt Collection Practices Act (FDCPA) requirements regarding certain disclosures for consumers. The rule requires debt collectors to provide, at the outset of collection communications, detailed disclosures about the consumer’s debt and rights in debt collection, along with information to help consumers respond. The rule requires debt collectors to take specific steps to disclose the existence of a debt to consumers, orally, in writing, or electronically, before reporting information about the debt to a consumer reporting agency. The rule prohibits debt collectors from making threats to sue, or from suing, consumers on time-barred debt. The rule will become effective on November 30, 2021, with the rule reissuing Regulation F published on November 30, 2020.

46 MORTGAGE BANKER | JANUARY 2021

FROM THE DESK OF THE ‘OM-BOBS-MAN’

Exams Will Focus On Whether Servicers Are CARES-ful

S

"Om-Bobs-Man" is the nickname Bob Niemi earned while serving as the NMLS Ombudsman in 2014 and 2015. Bob is a former Ohio state regulator and now an expert consultant on NMLS and state regulatory matters.

Bob can be reached at BNiemi@Bradley.com.

tate regulated mortgage servicers should carefully review examination manual supplements recently published on the CSBS website.

These procedures detail the requirements placed on mortgage servicers by the Coronavirus Aid, Relief, and Economic Security Act or CARES Act. The resources build upon the existing servicing exam worksheets and signals that state regulators should include CARES Act compliance in their 2021 servicing examinations.

The CARES Act was signed into federal law to help homeowners impacted by the pandemic. The act provides forbearance options and prohibits mortgage servicers from initiating or finalizing a foreclosure judgment or foreclosure sale on federally backed mortgage loans. Federally backed mortgage loans were defined as any loan which is secured by a first or subordinate lien on residential real property to include individual units of a condominium and cooperatives that were designed principally for the occupancy of one to four families.

The liens relate to mortgages that are backed or insured by Fannie Mae, Freddie Mac, USDA, VA, and FHA but do not always cover non-QM or portfolio loans. Some states and municipalities have layered additional restrictions and requirements, so state licensed mortgage services need additional compliance review beyond the multistate mortgage committee direction.

Examiners are advised of risks to consumers where mortgage servicers may have misled or not informed borrowers of all beneficial options that they were entitled. There has also been concern on initial forbearance and repayment discussions where servicers may have steered or dissuaded borrowers. The

tools focus the examiner to review scripts used and servicing policies related to information provided and compared to the Fannie Mae and Freddie Mac preferred language.

The examiner is also asked to review the servicer’s specific CARES Act policies relating to forbearance terms, credit reporting during forbearance, communication, consumer attestations, and training materials. The lack of clear policy directs the examiner to focus on specific loan reviews and forbearance terms offered compared to the CARES Act. These questions focus on forbearance periods of 180days even though many servicers offered initial 90-day terms under the language that entitled “up to” an initial 180-day period and a 180-day extension when needed. There is no mention of 90-day forbearance options or how they might be implemented in the exam supplement.

There is also direction to review the servicer’s consumer complaints and the tracking ability of the servicer to maintain complaints received since March 2020. The servicer should be able to identify any COVIDrelated complaints involving forbearance, foreclosure, and loss mitigation for evaluation.

The complaint response formats, scripts used, and consumer communications are also to be reviewed for consistency and compliance with the CARES Act. It should be noted that when examiners select loan files for review, examiners are asked to select those files in which borrowers have submitted a complaint related to payment assistance or loss mitigation.

These resources can be found for on the CSBS website at: https://www.csbs.org/ mortgage-examination-supplements.

Once again, to all those who were impacted in one way or another by COVID or the response, prayers for for a better 2021.

MORTGAGE BANKER | JANUARY 2021 47

Legal

The Feds Are Coming

For You

T

POLITICAL CHANGES MEAN GREATER SCRUTINY, CONSUMER PROTECTIONS

THE MORTGAGE COUNSELORS Mitchel H. Kider is the chairman and managing partner and Michael Kieval is a partner with Weiner Brodsky Kider PC.

48 MORTGAGE BANKER | JANUARY 2021

he coming year will bring many changes to our industry and our country. Although the past year more than proved the adage that one can never predict the future, there are several trends that look to be on track and others that may take some time to manifest fully.

The COVID-19 vaccines are great news and should eventually bring significant improvements to the way we have all been living our lives in 2020. But most Americans will not be vaccinated until at least sometime in the spring, and many things will not go back to the way they used to be for some time after that. Masks, limited indoor gatherings, and physical distancing are likely to be the reality for a while longer. But by sometime in the summer, many workplaces may be back to “normal” as the risks decrease and more employees have been vaccinated.

The bigger question marks, in our view, concern the health of the economy and of our society. While those individuals who have been able to work remotely have fared well, too many of our fellow Americans are out of work or otherwise struggling. They will feel the effects of these difficult times for a while, including barriers to home ownership. Political polarization makes it hard to fix these problems and others, and make it hard to compromise on things like the budget and the debt, which

could have inflationary effects down the road.

Politically, the change in administrations will shift regulatory and enforcement priorities, and after an initial lull caused by the change in leadership of each relevant federal agency, we expect enforcement overall to pick up. Consent orders and other resolutions of enforcement actions will be more likely to include consumer redress and higher penalties.

And a more conservative judiciary will keep things interesting from a litigation perspective, including a promising case the Supreme Court recently granted that has the potential to clarify that class actions should not include class members who suffered no actual injury.

Assuming a late push to privatize the GSEs is not completed before January 20th, GSE reform is likely to go back to the drawing board, particularly given the likelihood of divided government and the other, more pressing issues that will face the incoming President and Congress. This continuity, as well as the CFPB’s recent QM fix, should mean stability and predictability in the mortgage market at least in the short- and medium-terms.

Although our judicial system performed admirably in the aftermath of the election, a series of high-profile assaults on the rule of law and on the very idea of factual reality raise two concerns for our industry going forward: if the rule of law is weakened, will lenders be able to enforce loans and security interests? and if facts matter less than politics and power,

THE CHANGE IN ADMINISTRATIONS WILL SHIFT REGULATORY AND ENFORCEMENT PRIORITIES, AND AFTER AN INITIAL LULL CAUSED BY THE CHANGE IN LEADERSHIP OF EACH RELEVANT FEDERAL AGENCY, WE EXPECT ENFORCEMENT OVERALL TO PICK UP.

how will companies get a fair shake when the government brings enforcement actions?

Ultimately, the rule of law means that the law and the facts dictate the outcome, when we like it and when we do not, whether it helps those we support or those we oppose.

For now, at least, the rule of law remains strong.

Considering all of this, what should you be doing as you look ahead to the New Year?

First, we imagine that, like us, you are giving thanks, and giving thought to how you and your company can help your employees, customers, and neighbors in what is still a very difficult time for so many.

Second, you should take this opportunity to pause and review your regulatory compliance and corporate governance to make sure that you are satisfied with how your company is complying and functioning in a high-volume environment with many

people working remotely. We should all heed the lessons learned in 2009: like now, with a Democratic administration incoming and during a severe economic crisis, when regulators were preparing to increase compliance scrutiny, and investors and others were preparing to try to shift the losses of the crisis to those from whom they had obtained loans. Make sure that your loans and your documentation are clean and well-organized, to meet those challenges.

Third, apply the lessons that you have learned through the challenges of 2020: the restrictions, the uncertainty, and the volume to keep innovating. Innovate in technology, in process, in marketing, and in products, and include compliance at every step while you do. Innovation will continue to be key as we embark on a new year and the many challenges ahead.

Hussey AlexAlex Hussey

I AM A VETERAN AND THIS IS MY VICTORY.

“My victory is removing ‘can’t’ from my vocabulary.”

Alex was hit by an IED in Afghanistan. He lost both legs, his left hand and has a traumatic brain injury.

With support from DAV, Alex is taking on mountains.

DAV helps veterans of all generations get the benefits they’ve earned—helping more than a million veterans each year. Support more victories for veterans®. Go to DAV.org.

MORTGAGE BANKER | JANUARY 2021 49

Legal

MORTGAGE BANKING LAWYERS These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.

Thomas F. Vetters II Managing Partner

Mitchel H. Kider Managing Partner

Thomas E. Black, Jr. Managing Partner

tvetters@ravdocs.com 512-617-6374

kider@thewbkfirm.com 202-557-3511

tblack@bmandg.com 972-353-4174

Thomas Vetters is the managing partner of Robertson Anschutz Vetters, LLC (“RAV”) where he has spent his entire legal career developing a comprehensive expertise in the mortgage lending and compliance industry and helped develop the firm’s 50-state document software Docs on Demand®. Thomas is Board Certified in Residential Real Estate Law by the Texas Board of Legal Specialization.

In his 35 years as a practicing attorney, Mitch has represented banks, mortgage companies, residential homebuilders, real estate settlement service providers, credit card issuers, and other financial service companies in a broad range of matters. Mitch represents clients in investigations and enforcement actions before the Consumer Financial Protection Bureau, Department of Housing and Urban Development, Department of Veterans Affairs, Department of Justice, Federal Trade Commission, Ginnie Mae, Fannie Mae, Freddie Mac, and various state and local regulatory authorities and Attorneys General offices. In addition, Mitch acts as outside general counsel to smaller companies and special regulatory and litigation counsel to Fortune 500 companies.

Thomas E. Black, Jr. is managing partner of Black, Mann & Graham, LLP. Founded in 1997, the firm has offices in Dallas, Flower Mound, and Houston, Texas. Tom practices in the area of residential real estate law representing many of the nation’s largest banks and mortgage companies. He has been admitted to the practice of law in New York, Texas, Iowa and Washington. In 1976, Tom received a B.A. degree from the University of Notre Dame. He received his J.D. degree from the University at Buffalo in 1979 and an M.B.A. degree from The University of Notre Dame in 2008. After holding senior positions with a number of national mortgage companies, he returned to the practice of law in Texas in 1995. A frequent mortgage industry lecturer, he taught more than 25 years in the Mortgage Bankers Association’s School of Mortgage Banking. He is active in community service and held a variety of board positions, and serves as a Trustee of the University of Buffalo Foundation and of Saint Mary’s College, Notre Dame, Indiana.

Thomas currently serves on the Board of Directors for the Texas Mortgage Bankers Association and previously chaired their Regulatory Compliance Committee, Education Committee and served on their Executive Committee.

Thomas has prepared and presented papers on Texas Home Equity, Privacy, Safeguards, Loan Originator Compensation, ATR/QM and the TILA/ RESPA Integrated Disclosures. He is admitted to practice in the State of Texas and the U.S. Western District of Texas. RAV’s offices include Houston, Austin, Plano, and The Woodlands.

50 MORTGAGE BANKER | JANUARY 2021

MORTGAGE BANKING LAWYERS These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.

James W. Brody, Esq. Mortgage Banking Practice Group Chair jbrody@johnstonthomas.com 415-246-3995

Roger Fendelman Principal

Marty Green Attorney

roger@garrishorn.com 636-399-0169

marty.green@mortgagelaw.com 214-691-4488 ext 203

James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan securitizations, foreclosures, bankruptcy, and repurchase & indemnification claims. He received his B.A. in International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California. In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.

Roger Fendelman is a managing member of Garris Horn PLLC and CEO of Firstline Compliance. A mortgage compliance technology pioneer with more than 25 years of legal experience, Roger advises both mortgage originators and technology providers on compliance, technology, and automation challenges, with a focus on TILA, RESPA, QM, HOEPA, TRID, HMDA, ECOA and state consumer protection laws. For more than a decade, Roger served as the executive compliance leader of mortgage fraud and compliance technology innovator Interthinx and was the creative force behind PredProtect, one of the first cloud-based mortgage compliance automation solutions. Under Roger’s stewardship, the system became an industry standard for compliance, processing one million loans annually and earning a 2014 HousingWire AllStar award. He previously served in various capacities including compliance manager, processor and underwriter, providing him with an enhanced level of understanding for his clients’ day-today compliance needs.

Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.

MORTGAGE BANKER | JANUARY 2021 51

The C-Suite

Nancy Skinner President and Partner A Mortgage Boutique

A Mortgage Boutique, based in Murfreesboro, Tennessee, was founded with the goal of providing a “smaller and better” community mortgage lender in contrast to the larger lenders.

What do you find most rewarding about your job?

The most rewarding part of my job is knowing how many people we have allowed the opportunity of the “American Dream” of homeownership.

From first time homebuyers to people upsizing or downsizing their homes to refinances to help a household lower their monthly payments or a cash out refinance to payoff bills or make improvements to their property, knowing we have helped these people obtain their goals makes me feel that we have accomplished our job. A home is probably the biggest investment a person will make in their lifetime; we want to make sure we fit the borrower in the best loan program for their needs and make sure they understand and are comfortable with the process from beginning to end.

What time do you get up in the morning?

5:30 a.m.

What do you think will be the biggest challenge facing the mortgage banking industry in 2021?

I think we will be facing several challenges in the mortgage industry in 2021. With a new presidential administration coming into office in January to the continuing effects of the COVID pandemic, there are a lot of unknowns. Will rates remain low? Will guidelines be relaxed? Is there going to continue to be an inventory shortage? All these things have a significant impact on the mortgage industry, and while economists can make educated guesses, they are still in fact guesses. We have faced challenges in the mortgage industry for as long as it has been around, to include “Black Monday” in October 1987 to the mortgage meltdown beginning in 2007, but we have always found a way to come back with better opportunities for our borrowers with less risk for all involved.

What is the first thing you do in the morning?

What is the last thing you do at night?

Pet my cats.

Pet my cats.

What is your mantra?

Everything happens for a reason.

What is on your desk?

Desk planner, phone, and notebooks.

What time to you go to bed?

9:30 – 10:00 p.m.

What is your best habit?

Making a to do list at the end of the day for the next day.

Each month, the Mortgage Banker Magazine features two mortgage banking executives in the C-Suite.

”

A home is probably the biggest investment a person will make in their lifetime.

”

MORTGAGE BANKER | JANUARY 2021 53

The C-Suite

”

Being able to provide a stress-free and simplified process while saving customers money is very rewarding.

54 MORTGAGE BANKER | JANUARY 2021

”

Amit Haller

Co-Founder and CEO Reali

Reali is a mortgage lender with 153 employees and is headquartered in San Mateo, California with an engineering team based in Tel Aviv, Israel.

What do you think the biggest challenge the industry is facing in 2021?

What is the most rewarding thing about your position?

I get to create and direct life-changing products for the entire homeownership journey with an incredible team. Seeing how Reali impacts people's lives daily, and driving results for the consumer, is what keeps me going. Buying and selling a home and the process of getting a mortgage are the most stressful transactions in someone's life. Being able to provide a stress-free and simplified process while saving customers money is very rewarding.

What time do you get up?

I get up at 5 a.m. every weekday; on weekends, I sleep in later.

What is the first thing you do in the morning?

The very first thing I do is let my dog Padfoot out while I fix my first of many espressos for the day. Another 15 espressos are still to come throughout the day until midnight.

2021 is a great year to demonstrate the need for a super-efficient process. Fragmentation throughout the real estate and financing process in the industry today is our biggest challenge. With many service providers and regulatory agencies handling different tasks, customers pay the price for inefficiency.

Interest rates will continue to stay low and drive demand by the consumer. If mortgage bankers cannot keep up with demand or develop an efficient process, the disruptors will come.

What is your mantra?

My mantra is: ask why five times. Asking why is highly important as you are problem-solving and looking to disrupt. Often, the reality and the perception of something may be very different. The only way to understand is to keep digging in. To me, why? is the most important question in life.

What is on your desk?

My trusty Space Gray MacBook Pro.

What time do you go to bed?

Midnight.

What is your best habit?

My best habit is the ability to look at the glass half full in any situation, both in my professional and personal lives.

What is the last thing you do at night?

I drink one last espresso right before my head hits the pillow. It relaxes me and helps me fall asleep.

Each month, the Mortgage Banker Magazine features two mortgage banking executives in the C-Suite.

Data Download

Top Origination Markets by Loan Volume NOW PART OF

Consolidated Metropolitan Statistical Area (CMSA)/ Metropolitan Statistical Area (MSA)

% of Lock Volume

MOM Growth

Avg Loan Amount (S)

497,390

Avg Rate

Avg FICO

Avg LTV

Purchase

Refi

2.845

756

62

19%

81%

1

Los Angeles-Long Beach-Anaheim, CA

5.62%

-8.41%

2

Washington-Arlington-Alexandria, DC-VA-MD-WV

4.94%

-3.96%

419,918

2.721

752

75

30%

70%

3

New York-Newark-Jersey City, NY-NJ-PA

4.78%

-7.24%

399,675

2.827

746

72

39%

61%

4

Chicago-Naperville-Elgin, IL-IN-WI

3.39%

-8.98%

271,774

2.839

747

76

35%

65%

5

Seattle-Tacoma-Bellevue, WA

2.81%

-10.08%

427,261

2.831

752

69

26%

74%

6

San Francisco-Oakland-Hayward, CA

2.78%

-9.50%

587,325

2.841

765

59

20%

80%

7

Boston-Cambridge-Newton, MA-NH

2.74%

-7.66%

405,574

2.813

753

67

27%

73%

8

Phoenix-Mesa-Scottsdale, AZ

2.61%

-10.62%

296,904

2.894

740

75

37%

63%

9

Denver-Aurora-Lakewood, CO

2.52%

-6.98%

356,956

2.815

752

70

26%

74%

10

Dallas-Fort Worth-Arlington, TX

2.44%

-5.13%

299,187

2.848

738

78

42%

58%

11

San Diego-Carlsbad, CA

2.05%

-12.02%

475,966

2.760

755

67

22%

78%

12

Riverside-San Bernardino-Ontario, CA

2.00%

-10.68%

342,703

2.850

733

74

32%

68%

13

Atlanta-Sandy Springs-Roswell, GA

1.91%

-3.91%

277,837

2.842

732

79

45%

55%

14

Houston-The Woodlands-Sugar Land, TX

1.74%

-8.48%

274,914

2.843

734

80

53%

47%

15

Philadelphia-Camden-Wilmington, PA-NJ-DE-MD

1.73%

-10.82%

280,611

2.833

741

78

41%

59%

16

Miami-Fort Lauderdale-West Palm Beach, FL

1.54%

-6.04%

326,533

2.902

732

77

49%

51%

17

Minneapolis-St. Paul-Bloomington, MN-WI

1.51%

-12.46%

283,363

2.796

753

75

32%

68%

18

Baltimore-Columbia-Towson, MD

1.42%

-5.46%

326,634

2.794

746

79

36%

64%

19

Portland-Vancouver-Hillsboro, OR-WA

1.34%

-3.48%

344,738

2.834

754

71

28%

72%

20

Sacramento--Roseville--Arden-Arcade, CA

1.30%

-8.98%

362,706

2.850

749

70

27%

73%

SOURCE: Optimal Blue, Plano, TX. Data is based on loans locked within Optimal Blue’s Digital Mortgage Marketplace platform.

Optimal Blue operates the leading Mortgage Marketplace Platform, connecting a network of originators and investors and facilitating a broad set of secondary market interactions. Nearly $2 Trillion of transactions are processed each year across the Optimal Blue platform. For more information, please visit www.optimalblue.com or email datasolutions@optimalblue.com.

Through actionable data and analytics, Optimal Blue enable mortgage lenders and professionals to visualize and track performance, compare profit margins, and assess the effectiveness of secondary marketing strategies.

56 MORTGAGE BANKER | JANUARY 2021

Delinquencies Improved Again in November 2020, But Nearly 2.2 Million Seriously Past-Due Mortgages Remain •

Despite seasonal headwinds, mortgage delinquencies improved for the sixth consecutive month in November 2020, falling to 6.33% from 6.44% in the month prior

•

November’s 4,400 foreclosure starts and 176,000 loans in active foreclosure are both at their lowest levels on record since Black Knight began reporting the metrics in 2000

•

The national delinquency rate is now down 1.5 percentage points from its peak of 7.8% in May but remains a full three percentage points (+93%) above pre-pandemic levels

•

•

While early-stage delinquencies – borrowers one or two payments past due – have fallen back below pre-pandemic levels, seriously past-due (90+ days) mortgages remain 1.8 million above pre-pandemic levels

Prepayments fell 11% from October’s 16-year high; however, with interest rates at record lows and refinance incentive at an all-time high, prepay activity is likely to remain elevated in the coming months

•

Foreclosure activity remains muted as widespread moratoriums remain in place

Totals are extrapolated based on Black Knight’s loan-level database of mortgage assets. All whole numbers are rounded to the nearest thousand, except foreclosure starts, which are rounded to the nearest hundred.

About Black Knight As a leading fintech, Black Knight is committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership. For more information on Black Knight, please visit www.blackknightinc.com.

Black Knight is a leading provider of integrated software, data and analytics solutions that facilitate and automate many of the business processes across the homeownership lifecycle.

MORTGAGE BANKER | JANUARY 2021 57

B2B

BUSINESS SERVICES DIRECTORY Amanda Bowers VP of Marketing abowers@pfic.com

Michael Whipple Vice President michael.whipple@ chenoafund.org

208.250.9132

Shawna Adams, Managing Partner Co-Founder

wecanhelp@aselite.com

913.638.8247

Mitchel H. Kider Managing Partner

kider@thewbkfirm.com

202.557.3511

58 MORTGAGE BANKER | JANUARY 2021

Proctor Financial provides comprehensive insurance products and service solutions for financial institutions.

While weaving compliance throughout all our applications and technologies, Proctor operates as an extension of our clients, where partnership meets innovation.

Chenoa Fund is an affordable housing program provided through CBC Mortgage Agency (�CBCMA�), a uniquely created and organized government institution. CBCMA is a public-purpose driven governmental entity specializing in providing 100% financing for loans guaranteed by the FHA, with a focus on under-served borrowers. Our mission is to provide funding for affordable housing opportunities in communities nationwide. CBCMA partners with quality mortgage lenders on a correspondent basis to provide down payment assistance for qualified home buyers in the form of second mortgages and gifts. All assistance is provided in compliance with FHA guidelines.

A&S ELITE CONSULTING - Where your business is the focus of our business.

We partner with clients to solve complex strategic problems, achieve operational objectives, and complete critical projects.

Our Elite team has successfully helped over 2000+ lenders select, implement, improve, and customize their LOS and lending technology. Collectively, we have beyond 200 years of experience in the mortgage industry. We are ready to help find solutions for your business!

Weiner Brodsky Kider PC is a Washington, D.C.-based firm with a national practice focused on compliance, regulatory, transactional and litigation matters related to financial services concerns. We represent a broad client base, from start-up businesses to Fortune 500 companies, throughout the United States.

MORTGAGE BANKER | JANUARY 2021 59

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