Mortgage Banker Magazine March 2020 by ambizmedia

THE

BANKER

Covering the Entire Mortgage Lending Process and Everything In Between

MAGAZINE March 2020

A Cloud of Certainty for Loan Servicing pg. 10

Transforming Servicing Through Cloud Computing And Workflow Automation pg. 14

Published monthly by Twelve 11 Publishing, LLC 9720 Royal Lamb Drive Las Vegas, NV 89145 Phone: 512.879.4363 Email: INFO@MORTGAGEBANKERMAG.com www.TheMORTGAGEBANKERMagazine.com SUBSCRIPTIONS This publication is for the benefit of mortgage banking professionals involved in all phases of the residential mortgage industry. If you are a mortgage banking industry professional and you do not currently receive The MORTGAGE BANKER Magazine, please go to www.themortgagebankermagazine.com and subscribe for FREE. The MORTGAGE BANKER Magazine is a digital monthly magazine that is sent directly to professionals' computers and hand-held devices. The subscription is FREE to all mortgage banking industry professionals. For additional copies for your colleagues and co-workers, please visit our website at www. themortgagebankermagazine.com and complete the online subscription form. To opt out of receiving The MORTGAGE BANKER Magazine, please send your request to “UNSUBSCRIBE” with your name, company name, and address to SUBSCRIPTIONS@ twelve11media.com.

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March 2020

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March 2020

FEATURES 10

A Cloud of Certainty for Loan Servicing Loans are popping up everywhere. Whether it’s large lenders offering new products, tech companies looking for a new way to improve an old practice, new startups, or known-brands trying to monetize a user base, more and more companies are moving towards loans. ANDY MORRISE

Transforming Servicing Through Cloud Computing And Workflow Automation I’m increasingly finding mortgage servicers at risk of losing customers by focusing too intently on applying band-aids when they really should be looking to the future and pursuing process innovation. And one of the best ways to achieve this goal is through cloud computing and workflow automation. JANE MASON

Evolution and Status of CloudBased Mortgage Applications

Will Advances in Mortgage Technology Over the Next 10 Years Relegate QC to a Minor Role?

In the technology world, terms like Blockchain, the Cloud, and Distributed Networks are used as if everyone understands the meaning of them. This article attempts to provide a basic understanding of cloud-based solutions for the mortgage industry..

In the last month’s issue of The MORTGAGE BANKER Magazine I laid out a plan for Mortgage QC adapting to the digital state. Digitization enables proactive, profitable, and machine powered QC. STEVE SPIES

TODD COLAS

Is it Time to Re-Evaluate Your CMS? Sometimes even the most seasoned compliance professional needs to, or should, take a step back and re-evaluate their institution’s CMS. When was the last time you completely re-evaluated your CMS? Have operations or sales made changes within their programs, which may include using a new vendor with whom you share customer information? FELECIA BOWERS

The MORTGAGE BANKER Magazine

March 2020

Special

SECTIONS

LOAN ORIGINATION

Reducing False Claims Act Risk in FHA Lending BOB BROEKSMIT

TECHNOLOGY

Blockchain as a Link to Improving Mortgage Servicing

LEGAL

52 54

The Mortgage Counselor MITCH KIDER

Mortgage Banking Lawyers

DEBBIE HOFFMAN

THE C-SUITE

QUALITY CONTROL & RISK MANAGEMENT

Security Risk: Fraudulent Closing Transfer Instructions Stealing Mortgage Pay-Offs TED CLAYPOOLE & DOMINIC PANAKAL

PROFILE: James Seely

PROFILE: Laura Brandao

COMPLIANCE

From the Desk of the Om-Bobs-man

Compliance Alphabet Soups - HMDA

PRESIDENT & PARTNER AMERICAN FINANCIAL RESOURCES

BOB NIEMI

GRES, REGULATORY AND GOVERNMENT AGENCIES

42 44

PRESIDENT & CEO RESIDENTIAL MORTGAGE SERVICES

FHA Training and Events

Monthly

DEPARTMENTS 49 Product Showcase 60 MBA Education & Training Calendar

61 White Papers & Webinars

62 Calendar of Events FHFA Proposes Updated 64 Data Download Minimum Financial Eligibility Requirements 66 Business Services Directory for Fannie Mae and Freddie 68 Sponsors Corner Mac Seller/Servicers

The MORTGAGE BANKER Magazine

March 2020

THE

BANKER

MAGAZINE

Our Mission The 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. PUBLISHER Ben Slayton BSlayton@MortgageBankerMag.com MANAGING EDITOR Brian Honea Editor@MortgageBankerMag.com SENIOR EDITOR Jill Emerson JEmerson@MortgageBankerMag.com OPERATIONS DIRECTOR Dawn Slayton DVSlayton@MortgageBankerMag.com ADVERTISING David Hoierman Hoierman@MortgageBankerMag.com PRODUCTION Henry Suchman HSuchman@MortgageBankerMag.com

FROM THE EDITOR The mortgage banking industry has been using “the cloud” for more than a decade now, but like most forms of technology, the way people do business on the cloud is ever-evolving. There is still much to learn and much we don’t know; after all, the word “cloud” evokes a sense of the unknown (i.e. “clouded in mystery”). Hopefully this issue of The MORTGAGE BANKER Magazine will shed a little more light on the topic of cloud-based servicing, with help from expert contributors such as Jane Mason, CEO of Clarifire, writing about how servicing is being transformed through cloud computing and workflow automation; and, Adam Morrise of LoanPro Software, giving us his take on why cloud-based servicing is a “better solution.” And if that weren’t enough, we also feature a contribution from Todd Colas of VAT Mortgage Services on the history and evolution of cloud-based mortgage apps. All three pieces are extremely informative and provide us with a unique perspective on ways the cloud is being utilized in the mortgage industry. No doubt cloud-based computing will continue to evolve within the mortgage industry. Is your business doing any business on the cloud? If so, what are some things you have discovered about working with the cloud that might help others in the industry? How have you found it is different from the previous way you did business? What are some challenges you have faced with working on the cloud? Let us know; we are always listening. You can always drop us a line via the email address below.

DIGITAL MEDIA Eric Souza ESouza@MortgageBankerMag.com . COLUMNISTS & CONTRIBUTING AUTHORS Felecia Bowers Bob Broeksmit Todd Colas Ted Claypoole Debbue Hoffman Mitch Kider

Jane Mason Andy Morrise Bob Niemi Dominic Panakal Steve Spies

The MORTGAGE BANKER Magazine is the official publication of the Mortgage Compliance Professionals Association of America.

Brian Honea Managing Editor Editor@MortgageBankerMag.com The MORTGAGE BANKER Magazine welcomes your feedback. If you have comments, questions, criticisms, praise, or information to share with us and our readers, please write us at Editor@MortgageBankerMag.com.

March 2020

AUTHORS

Robert Broeksmit

Ted Claypoole

Todd Colas

Robert (Bob) Broeksmit is president and CEO of the Mortgage Bankers Association (MBA). Bob is a senior finance executive and corporate officer with a 33-year career in the mortgage sector. He has directed all aspects of lending activities, including marketing, sales, operations, secondary marketing, loan servicing, and default management.

Ted Claypoole, partner with Womble Bond Dickinson, practices technology, data management, and internet business law. He leads the firm’s FinTech team, edits the www.heydatadata.com blog, and has published books, including editing The Law of Artificial Intelligence and Smart Machines, released last year by the American Bar Association.

Todd Colas is a former Oracle consultant, CEO of Virtual AdTaker (Pub & Posting), and founding member of VAT Mortgage Services and its flagship default application solution, Cloud-Claims. Academic All-American, University of Pittsburgh, 1984.

Andy Morrise Andy Morrise has worked in the lending industry for over 10 years. His experience includes origination, decisioning, collections, and administration. He currently holds a seniorlevel position at LoanPro Software.

Debbie Hoffman Debbie Hoffman is an experienced executive leader who has built and led teams in financial services and legal/compliance and technology innovation, including blockchain and cryptocurrency. She is founder and CEO of Symmetry Blockchain Advisors and a cabinet member of The Masters Conference™.

Dominic Panakal Dominic Panakal is an associate in Womble Bond Dickinson’s IP transactions, and privacy and cybersecurity practice groups. Dominic advises clients on international and domestic data privacy laws and technology transactions. He is a frequent contributor to the firm’s https://heydatadata. com/ blog.

The MORTGAGE BANKER Magazine

Steve Spies Steve Spies, CMB, CFE, JD is principal and founder of SWS Risk Advisory LLC. His firm enables len Dominic Panakal is an associate in Womble Bond Dickinson’s IP transactions, and privacy and cybersecurity practice groups. Dominic advises clients on international and domestic data privacy laws and technology transactions. He is a frequent contributor to the firm’s https://heydatadata. com/ blog.

March 2020

Jane Mason Jane Mason is CEO and founder of Clarifire, a Software-as-a-Service (SaaS) company that specializes in workflow automation across industries. Jane is a recognized leader in technology solutions for the financial services and mortgage industries.

Loan Origination

REDUCING FALSE CLAIMS ACT RISK IN FHA LENDING

By Bob Broeksmit, MBA

Important aspects of the 2020 housing outlook, in addition to demand, supply, and rates, are the various changes to the regulatory environment that will affect lenders and borrowers. Improvements to FHAâ&#x20AC;&#x2122;s defect taxonomy, the method used to identify defects at the loan level and the remedies for such shortcomings, are one of the more positive developments, particularly for first-time homebuyers and low- and moderate-income borrowers.

The MORTGAGE BANKER Magazine

March 2020

These changes are part of a larger effort by HUD to revise the loan review process and simplify the certifications that lenders make in connection with the FHA program in order to reduce the risk of False Claims Act enforcement for immaterial loan origination errors. MBA has championed reforming the taxonomy for some time. Our posture has been that FHA does not need new rules and regulations to govern our industry, but rather more clarity and transparency in the ones that are already on the books. Since the crisis, the legal and reputational risks associated with originating FHA-insured loans have substantially increased through hyper-technical enforcement of FHAâ&#x20AC;&#x2122;s lending requirements, driving many lenders â&#x20AC;&#x201C;, particularly banks, away from offering FHA loans to their customers. To address these concerns, the just-released final defect taxonomy includes specific remedies for various tiers of defect severity. This will allow lenders to understand in advance the remedies for different types of loan defects. Not only did HUD work

to make changes to the loan review process, but last October, HUD Secretary Ben Carson announced a joint memorandum of understanding (MOU) between HUD and the Department of Justice (DOJ). This MOU stated that the DOJ would defer primarily to HUDâ&#x20AC;&#x2122;s administrative proceedings to evaluate and remediate loan origination errors, rather than pursuing the draconian damages allowed in the Civil War-era False Claims Act. It also provided for closer coordination between HUD and the DOJ throughout the investigative process. In addition, HUD revised the certifications that lenders provide annually and on each loan. The changes to the loan-level and annual certifications more closely link them to relevant regulations, as opposed to every requirement found in the FHA Handbook. They also stress that the underwriting process should allow for judgment and discretion on the part of underwriters. Lastly, the loanlevel certification ties into the defect taxonomy as the remedy for any defects, and thus limits the risk that errors will be adjudicated through

The MORTGAGE BANKER Magazine

March 2020

the False Claims Act. Taken together, these changes represent a significant effort by HUD to resolve longstanding concerns about exposure to False Claims Act penalties, and to bring lenders back to the program. HUD took steps to make these changes durable by providing lenders with some certainty that a future administration could not easily return to the indiscriminate use of the False Claims Act to pursue lenders for immaterial defects on FHA loans. While individual lenders must consider when and how to return to FHA lending or increase their participation in the program, these reforms represent very positive progress in restoring clarity and certainty. Housing market stability is strengthened when key programs like FHA are supported by a deep pool of participating lenders, depository institutions, and independent mortgage banks alike. I commend HUD for these steps and encourage them to continue their efforts in other areas, particularly on FHA servicing reforms. MBM

Loan Servicing

A Cloud of Certainty for Loan Servicing By Andy Morrise, LoanPro Software

oans are popping up everywhere. Whether it’s large lenders offering new products, tech companies looking for a new way to improve an old practice, new startups, or knownbrands trying to monetize a user base, more and more companies are moving towards loans. And lending is a great business model. A loan is more than a single transaction, it is a long-term revenue stream. As someone who has worked in the lending industry for over 10 years, I’ve seen lenders come and go. I’ve worked with companies that were a flash in the pan, raising a lot of capital and deploying it quickly, only to fail after a few years. I’ve also seen companies base their entire business on a lending strategy, but change their fundamentals as they learned through growth. As a lender, it’s tempting to focus on the beginning of the lending process. If you ask most lenders, the thing that sets them apart from the others, their “secret sauce,” falls into the customer acquisition, underwriting, or decisioning steps of The MORTGAGE BANKER Magazine

giving a loan. Don’t get me wrong, choosing and attracting the right borrowers is an important step of the process, but it’s far from the only step. Companies downplay the importance of loan servicing. They put it on the back burner and decided they’ll “get to it when they get to it.” But, after the excitement of acquiring a customer has passed, the reality of collections, loan management, and customer service sets in. The reality I’ve seen is that giving a loan in a clever way, while important, can give a false sense of confidence. But, if your “secret sauce” is optimum loan servicing, your lending company will be perfectly scalable. A servicing focus will help you establish a linear relationship between the more money you put in and the more money you get out, turning your lending into a cash machine. So, how can you increase transparency in loan tracking, streamline your lending processes, cut down on personnel costs, and increase your collections? One way that lenders are achieving 10

March 2020

Loan Servicing The C-Suite these important results is through cloud-based loan servicing software. Cloud-based software has the ability to make all loan information available anywhere the Internet can be accessed. Data can be consolidated and organized well. A loan account can show the borrowers on a loan, their references, credit score, payments, amortization, uploaded loan documents, communication history, downloadable forms, and more. A loan file should be a one-stop shop for information about that loan. If loans are securitized and sold, all this data should go with them, making them more valuable to boot. At its core, loan servicing software should accurately calculate, record, and track loans. When done in the Cloud, your software becomes a reliable source of truth. Input to the software can come from any employee or even borrowers themselves, without duplicating work or corrupting files. Because of this, cloud-based loan software tends to add transparency in lending. One of the biggest questions a lender asks when looking at software is, “How will this fit in to my current processes?” Traditional loan servicing, using a local system, can be difficult. Traditional software has to be installed on each computer where it’s used, or it has to be installed on the company network and accessed remotely, which makes it much harder to make loan servicing a collaborative effort. Instead, loans have to be worked on by one person at a time and coordination between coworkers requires a lot of effort and organization. Cloud-based loan servicing has become recognized as a better solution because it’s easier for a company to keep existing processes while using software as an organized system of record for loans. A cloud-based system can be used out of the box, without the need to install software. Most modern loan management systems (LMS) have recognized that lending is a process, not an event. A good LMS will offer customization and workflow automation. If you’ve ever worried about how you would handle and an SCRA interest rate adjustment, a bankruptcy, a write off, or any other scenario that deviates from the happy path of lending, then a good cloud-based LMS could make The MORTGAGE BANKER Magazine

a marked improvement to your servicing. One of the biggest advantages to cloud-based servicing is that cloud-based software is connected software. Most cloud-based solutions make it easy to connect with payment processors, data providers, and communication services. Lenders appreciate the ability to take payments, look up bankruptcy status, or follow OFAC compliance rules in the same system where the rest of their servicing is done. If your employees spend significant time sending email, SMS, or print communications to your borrowers, you should consider the advantage of automating these things using a cloud-based LMS. Most cloud-based servicing software connects to one or more of these services, and will perform tasks like sending loan statements automatically, without any user input. I worked with a company a few years ago that decided to transition to a cloud-based solution. They had been using a desktop system that was first developed when personal computers had just started to gain traction in the market. This company had been operating for years on a system that provided little transparency. Notifications were routinely ignored because reconciling the work of multiple employees on a single loan often led to small errors that were considered unavoidable. When this company extracted its data from this old system and imported it to a cloud-based software, they discovered $32,000 in outstanding principal, interest, and fees that they didn’t realize they had, and hadn’t been collecting! Their old way of accepting payments, which had taken 20 hours of employee time each month, now took less than an hour. Everything became visible, and customers were regularly contacted with no ongoing effort. If you are a lender trying to take your lending to the next level, consider using a modern, cloudbased, loan servicing software platform. Let your vendor worry about uptime, data backups, and software improvements. Get the scalability, transparency, connectivity, and central source of truth that will elevate your servicing and make your business more profitable. MBM 12

March 2020

Today’s Yesterday’sProblems Problems Today’sMortgage Mortgage Solutions Solutions for for Yesterday’s

Cloud-Claims CLOUD-CLAIMS

Cloud-Claims leverages the information in the is a thin-client based, service hostCloud-Claims servicing system to insure that the claim bureau neutral application that captures data is complete and filed within the from anytimeframe. mortgage servicing system and feeds specified a relational database that automates the All Claim Types claims preparation process. Cloud-Claims leverages the information in the host Open Imports servicing system to insure that the claim is complete Track Book Loss and filed within the specified timeframe.

Reasonable Diligence All Claim Types • Open Imports • Track Book Loss Reasonable Diligence • Compliance Engine Compliance Engine EDI Deliverable • Pub & Posting

EDI Deliverable Pub Cloud-Claims & Posting The Difference System Pedigree

• Designed and produced by industry experts • Automated claims process through use of validation rules • Provides uniform interpretation of guidelines Pedigree • System Processor intervention is only necessary when exceptions are identified by the system • Designed and produced by industry experts • • Automated Workflow management allows for appropriate claims process through use of validation rules distribution, tracking, resolution and quality control of • Provides uniform interpretation of guidelines identified exceptions • Processor intervention is only necessary when exceptions • are All major claim types electronic filing is supported identified by the system

The Cloud-Claims Difference

System Advantages • Workflow management allows for appropriate distribution, tracking, resolution and quality control of identified • Multiple Servicing Platforms exceptions • The most comprehensive Rules Validation engine in the • All major today claim types electronic filing is supported industry • System is thin, flexible and multi-device enabled System Advantages • Predictive Loss Analysis can forecast the true amount that • Multiple Servicing Platforms will be paid in the claim most comprehensive • • The Dynamic Batch ReportingRules Validation engine in the industry today • Bi-Directional EDI Enabled • System is thin, flexible and multi-device enabled • Predictive Loss Analysis can forecast the true amount that will be paid in the claim

Cloud-Claims Cloud-Claims

Complete A-Z Automated Claims Processing

•• FHA FHA(01-07 (01-07including includingSupplementals Supplementals&&Incentives) Incentives) •• VA VA • USDA • USDA • Conventional (571, 1073, 104SF) • Conventional (571, 1073, 104SF) • Electronic gateway to HUD VAN • Electronic gateway to HUD VAN Automated Processing Features Automated Processing Features • Book Loss Claim Categorization Loss Claim Categorization •• Book Reasonable Diligence Timeline Management • Reasonable Diligence Timeline Management • Escrow Balance at Default Reconciliation • Escrow Balance at Default Reconciliation Claims Pre-Created Upon Data-Load

Pre-Created Upon Data-Load •Claims No Data Entry Data Entry •• No Exception Base Process • Exception Base Process Multi Services / Multi Client Design

Services / Multi •Multi Handle all Claims andClient ClientsDesign in one environment all Claims in one environment •• Handle Distributed Workand andClients Client Review •• Distributed DistributedWork Client Reporting and Client Review • Distributed ClientBuilt Reporting Claim Intelligence into Rules Engine •Claim Rules Engine Ensures Intelligence BuiltCompliant into RulesClaim Engine •• Rules Exceptions Described in Novice Terms Engine Ensures Compliant Claim • Exceptions Described in Novice Terms

Providing Lift to the Business Providing Lift to the Business One Place for all Processing •OneSingle Source PlaceData for all Processing •• Single MultiData Client Source •• Multi OfferClient Client Distributed Claim Functions •• Offer Distributed Reporting Claim Functions Client Distributed Efficiency in Claim Processing • Distributed Reporting •Efficiency Work onin Exceptions Claim Processing • Decrease Claims Processing Time • Work on Exceptions • Simple Review vs Claim Creation • Decrease Claims Processing Time • Consistent / Common Interface • Simple Review vsBalancing) Claim Creation (Resource Load Common Interface •• Consistent Handling /Claims in Process (Resource Load Balancing) • Eliminate Extensive Training Claims in Process • • Handling Significantly Decrease Start Up Time • Eliminate Extensive Training • Significantly Decrease Start Up Time

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Loan Servicing

TRANSFORMING SERVICING THROUGH CLOUD COMPUTING AND WORKFLOW AUTOMATION By Jane Mason, Clarifire

’m increasingly finding mortgage servicers at risk of losing customers and their competitive edge by focusing too intently on applying bandaids to specific issues to manage cost control and regulatory compliance, when they really should be looking to the future and pursuing process innovation. And one of the best ways to achieve this goal is through cloud computing and workflow automation. Cloud computing has already made its mark on our industry and is currently paving the way for servicers to finally let go of owning and operating legacy infrastructures. At the same time, the digitization of workflow is transforming how servicers do business. It’s the convergence of these two technical innovations, however, that has the greatest potential to lift mortgage servicers to new levels of efficiency in the new decade.

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THE CLOUD COMPUTING REVOLUTION

Based on a recent survey of financial institutions, cloud computing is number four on the Forbes magazine’s hot technologies list, and approximately 25 percent of those surveyed planned to implement or make further investments in cloud computing in 2020. Of this subset, 40 percent have already embraced cloud computing. The survey also revealed that the current motivation for financial institutions to enhance their cloud computing efforts is driven by three key factors: The ongoing adoption of artificial intelligence (AI), the management of data analytics through “as-a-service” open platforms, and, the desire to improve competitive edge and consumer delivery through integration, coupled with workflow automation. Mortgage servicers have only scratched the surface in this area. Whether it’s because they have

March 2020

been held back by restricted budget resources or a lack of executive support, many entities have fallen way behind when it comes to cloud computing. Yet, the benefits are overwhelming. In an industry encumbered by legacy systems, cloud software creates autonomy from antiquated infrastructures by allowing users to pick and choose the services they want and access and pay for them only when needed. There are three primary “as-a-service” cloud computing models in use today: Infrastructure as a Service (IaaS), Platform as a Service (PaaS), and Software as a Service (SaaS). All three cloud services are easy to access, maximize data utilization, and support complex business intelligence. SaaS, however, is the most widely used type of cloud service because it alleviates so much of an organization’s internal technology burden by running most applications through its web browser. The independence that SaaS solutions has given mortgage servicers has been revolutionary in our industry because it has allowed organizations to evolve technology and security strategies while maximizing productivity and cost efficiencies.

THE DIGITIZATION OF WORKFLOW

While cloud computing is freeing servicers from legacy IT infrastructures, digital workflow automation is helping them automate and transform operational processes far beyond what they have been able to achieve a few short years ago. With the digitization of workflow, mortgage servicers can leverage their data in a sophisticated manner to evolve rules management and decisioning, as well as embrace AI and machine learning, which immediately impacts operational efficiency. The end result of digital workflows is that servicers no longer must struggle with multiple moving parts. By letting cloud computing and digital workflow automation do the heavy lifting, organizations now have the freedom to do what they do best. The benefits are enormous. Most importantly, these innovations enable servicers to optimize their existing processes and systems in a concise manner while supporting complex automated decisioning that improves productivity, cost efficiency, and the customer experience. Workflow digitization enabled through cloud computing can strategically reshape business processes and service offerings plus they can be implemented easily and cost-effectively. This distinctive blend of these technologies has the potential to transform a company’s internal

Loan Servicing strategies by organizing complex processes, implement straight-through processing, systemically drive data, images and intelligence throughout the organization, and support change management. It can also revolutionize the external customer experience by enabling mortgage borrowers to gain 24/7 access to loan data and processes available in a mobile, self-serve mode through SaaS offerings. However, servicers need to seize this opportunity to leverage these innovations now if they wish to gain a competitive advantage.

default servicing and modification options for impacted borrowers a constantly moving target. Yet, cloud technology and workflow automation can greatly streamline the delivery of resources to distressed borrowers when they need them most.

THE COMBINATION OF INNOVATIONS IN ACTION

Over the coming decade, the convergence and practical applications of cloud computing and digital workflow automation will be profound for mortgage servicers. From looking at the industry’s current major obstacles, from regulatory change to cybersecurity to borrower satisfaction, one can see very clear examples of how digital workflow in a cloud computing environment can help significantly improve operational efficiency in the following areas. Transfer of Servicing – For many years, the servicing transfer process has been gripped with errors, beginning with the onboarding process. With cloud computing and digital workflows, servicers can better manage the exception process using complex decisioning that identifies issues as they occur and pushes data to identify, notify, and correct errors. Borrower Satisfaction – One of the most talkedabout areas in need of improvement in our industry is the borrower experience. Cloud computing and digital workflows can significantly improve customer satisfaction levels by giving borrowers greater transparency, 24/7 access to information, and the ability to interact and gain real time responses to their needs on their own. In fact, these innovations will transform how servicers and borrowers interact entirely. Disaster Recovery – A never ending roller coaster, disaster recovery and relief have consumed servicing resources over the past several years at huge costs. Trying to stay abreast of unpredictable events and their devastating impacts has made

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As we move into the new decade, digital disruption will continue to impact every aspect of our industry, including the pursuit of a strong, strategic approach to business transformation and greater operational efficiency. There are unprecedented demands for innovation being placed on servicers, amidst constant regulatory change, fluctuating default modification requirements, and rising costs to service. For this reason, the need for digital workflow automation has become crucial for success. Meeting these demands in a SaaS environment ensures servicers can immediately realign their processes as new issues are identified, then implement corrective actions, and streamline operational responses. For most, the key is to envision workflow done differently using a sophisticated, configurable application, one that includes proven industry processes and features and facilitates the rapid deployment of complex business process management. When delivered in a SaaS environment, organizations can use these applications to select whichever capabilities they need, not just those available through their legacy systems. Servicers will also be able to gain the power to manage fluctuating default events, such as disaster recovery, as well as maximize opportunities to engage borrowers, and significantly improve internal processes from onboarding through payoff. In order to future-proof their businesses, servicers need to stop applying band-aids and start thinking ahead. Ultimately, leveraging a combination of cloud computing through SaaS and digital workflow automation will allow servicers to focus and improve on their internal areas of expertise, while simultaneously achieving operational efficiency and standing out from the competition. And, they can end their reliance on legacy infrastructures, too. Greater efficiency, lower costs, and a better customer experience, now that’s a future we can all get behind. MBM March 2020

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Technology

Evolution and Status of Cloud-Based Mortgage Applications By Todd Colas, VAT Mortgage Services

n the technology world, terms like Blockchain, the Cloud, and Distributed Networks are used as if everyone understands the meaning of them. This article attempts to provide a basic understanding of cloud-based solutions for the mortgage industry and provide some insight into the evolution of mortgage applications utilizing the Cloud. One of the best ways to understand cloudbased application solutions may be to review the events which led to cloud computing and services. In the early years of mortgage servicing, most mortgage banking and servicing systems were operating on Big Iron, which is commonly referred to as mainframe computing. These large machines operated in large data centers where user terminals were hard-wired into the mainframes and nicknamed green screens. As you can imagine, this was very limiting, but also very secure because there was no external access. Most of these applications were developed in languages like Cobol, Fortran, Assembler, and other old-school technologies. The MORTGAGE BANKER Magazine

In the early to mid-80s, the next generation of computing was defined as client-server technology. Unlike mainframe technology, much of the data and calculations were performed on a local machine that connected to much smaller back-end servers. During this period, other technologies and languages began to emerge. The shift to move from mainframe to clientserver technology was slow to gain traction, especially since a major portion of mortgage servicing processing was done on mainframe systems. Client-server technology did provide remote access accessibility to mortgagebased applications through terminal service solutions, which accommodated the function of green screens without being hardwired into a mainframe. 18

March 2020

As advanced as this new technology had become, the mortgage mainframe servicing systems were still pervasive. The reasons these technologies thrived are: (1) it would take an overwhelming investment and time to redevelop these applications in some other technology, and (2) if something worked well for decades, why take the risk and try something new? In the early to mid-90s, the Internet was introduced. This shift in technology moved applications from single-tier (mainframes) and two-tier (client-server) environments to a three-tier environment. Now, applications have turned into a three-tier environment: (1) client machine running through a web browser, (2) an application web server communicating with the web browser, and (3) a database server communicating with the application web server. The data traveled back-and-forth between all three tiers. The limitations of remote usage and infrastructure costs changed overnight. New computing languages started popping up and web applications started to evolve. During the initial phases of this new evolution, it was a whole new learning experience for application programmers. These software engineers had to adopt to a new way of developing software; however, in the mortgage industry, mainframe technology remained dominant, but now there was a new means of distributing data (mostly read-only mode). In the mortgage servicing and banking industries, there is nothing more critical than data security and mortgage compliance. The new web technology was unfamiliar to most and brand-new applications were slow to mature. Some mortgage applications did come out during this early period, but the mortgage industry was slow to adopt them. As we entered the new millennium, application technologies and databases

began to solidify. The development tools and technology to create client-server “like” applications on the web moved swiftly; however, even with the dramatic change in application development technology, the overall acceptance rate was still relatively low. The mainframe applications still controlled banking and mortgage servicing for the same reasons they always had: stability and cost of migration. The next phase of technology is not technology at all, it is the outsourcing of services and software solutions. At this point, you may be wondering, what is “the Cloud?” For the purposes of this article and as it relates to mortgage servicing, the Cloud would typically be an application (web-based software) running outside of your current IT framework and infrastructure. This technology only requires a secure connection to the Internet and capable of running on any secure device enabled (PC/MAC, iPhone, Android, Tablet, etc.), typically requiring some sort of additional authentication. The Cloud can also run your own custom-built applications outside the corporate firewall in coordination with your internal IT resources. There are various types of cloud environments and techniques, but some of the most recognizable cloud-based providers are companies like Amazon (AWS), Microsoft, Google, IBM, Oracle, Alibaba, and GoDaddy. There are also applications which run in a private cloud, whereas the web application is widely available to the Internet, but only accessible to an authorized set of users, like your bank account portal. You can view these kinds of services as “boutique applications.” They are not an end-to-end solution for mortgage servicing, but they represent a portion of critical solutions which are not readily available on the open market and intensive to build and maintain. At this juncture, you may be wondering,

The next phase of technology is not technology at all, it is the outsourcing of services and software solutions.

The MORTGAGE BANKER Magazine

March 2020

Technology “What happened to those mortgage mainframe applications?” The answer is not too much. Software developers have written applications to push and pull data from the mainframe and mask it with a web front-end. These mainframes may never go away and are like an old reliable Volkswagen, nothing fancy, but they get the job done. If your servicing operation utilizes mainframes, consider integrating those rich web boutique (cloud-based) applications with your mainframe database, while using your mainframe as the system of record. These cloud-based solutions can augment mainframe processes without disrupting the integrity of the database or attempting to extend out the mainframe functionality. External data can be captured, manipulated, and imported back into the mainframe at a relatively low cost and effort. It is perfectly normal to have part of your solution running in the Cloud and other parts running inside your servicing operation. The Cloud is something to embrace; simply think of it as an environment in which applications are hosted and maintained by someone else, typically very technical individuals and state-ofthe-art hardware. There are many degrees of architect providing failover, recovery, up time, level of data security, and overall support, well defined in a Service-Level Agreement (SLA). Pretty much any application developed in the last decade can run in the Cloud. In terms of cost-savings, the ROI of running it in the Cloud vs. internal solutions can be tremendous once you consider the security, networking, and database management resources required to run applications. I recommend that you proceed cautiously, but absolutely take advantage of both cloud-based applications and consider migrating some of your daily applications to the Cloud. Maybe start with something as simple as migrating one of your MS access applications. I hope this article has been helpful and informative. There are many resources out there on this subject, and I encourage you to do your research and continually evaluate the pros and cons of cloud-based services, as well as the different types of cloud options. MBM

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March 2020

Technology

BLOCKCHAIN AS A LINK TO IMPROVING MORTGAGE SERVICING By Debbie Hoffman, Symmetry Advisors

The mortgage servicing process contains compliance with multiple time sensitive requirements and various regulations, including the Truth in Lending Act (TILA), throughout the entire process. While the mortgage industry has been made aware of various methods to provide a more streamlined approach, one solution that has not been given much attention is the implementation of blockchain technology to aid in this burdensome process. Given how successful blockchain adaptation has been in promoting efficiency in other industries, it could also prove very helpful in improving many of the present inefficiencies that are a part of the current mortgage servicing process. Blockchain technology, if installed and utilized correctly, could significantly improve productivity, reliability, and accuracy in the process.

I. BLOCKCHAIN AS A SOLUTION TO CURE EXISTING MORTGAGE SERVICING DIFFICULTIES

because there is not one central hub where the information is stored that is susceptible to hacking or cyber breaches. This is due to the fact that the core of the technology allows for data to be stored not on one centralized server, but on a multitude of computers, or nodes, across anywhere from three to thousands of computers, in what is referred to as a â&#x20AC;&#x153;distributed network.â&#x20AC;? At the same time, blockchain technology also provides for privacy of sensitive and confidential personal information normally contained on mortgage documents, such as social security numbers, bank account numbers, and other financial information. The utilization of blockchain technology can also allow customers to make digital processing and servicing payments, while conveying this payment directly to the entity facilitating that step in the mortgage process. There is a component included in blockchain technology that allows for electronic and simultaneous payment among parties and, while not bitcoin, blockchain protocols include a payment concept to permit for the exchange of digital currency. Therefore, such a digital payment would allow for secure and efficient transactions because currency can be immediately transferred to the multiple different entities involved in the mortgage servicing process, simultaneously and without delay.

Two significant hiccups in the current servicing process include delays in both processing payments and in transferring documents from one entity to another. Because there are specific time-sensitive requirements included in regulatory requirements, complying with these timelines is often difficult for all involved parties. For example, TILA requires that all periodic mortgage payments must be credited the same day that they are received by the servicer. In addition, no more than seven days after a borrower makes a written request inquiring of the applicable mortgage balance, the servicer must provide the borrower with an accurate payoff balance. Complying with these types of deadlines can be exceedingly difficult with the number of payments and requests received by servicers each day, particularly with the lack of technology and automation currently adopted in the process. Furthermore, the lack of automation also makes it impossible to simultaneously process payments, transfer information, and access documents across the different and unrelated servicing entities involved in this rather lengthy and complicated process. The adoption of blockchain technology could improve the efficiency of the servicing process because it provides for technological automation that ensures compliance with time-sensitive requirements. In addition, this technology would allow for simultaneous information transmission from one entity to another. Beyond simply being able to promote efficiency, blockchain can also allow all documents to be uploaded and maintained on one central digital network, thereby reducing operating costs and processing times in the transmittal of such documents. Data and information can be seamlessly exchanged between entities so that it can be accessed and reviewed by multiple parties simultaneously and in real-time. Blockchain technology can also be used to limit the access of individuals to certain different documents included on the network, and perhaps even limit access to particular sensitive information contained in these documents. By processing information in this manner, it is kept secure The MORTGAGE BANKER Magazine

II. POSSIBLE USES OF BLOCKCHAIN TECHNOLOGY FOR MORTGAGE SERVICING There are multiple different yet specific examples that are ripe for the implementation of blockchain technology at present. Notably, blockchain technology could be used in the transfer of servicing (ToS) rights. Currently, the extensive ToS process is completed almost exclusively manually, which is very inefficient and costly. Blockchain technology would make this process much more efficient, while ensuring compliance with required regulations and standards. Questions that may arise include how this process is completed more efficiently without compromising accuracy, and how can compliance with regulatory requirements ultimately be achieved? Blockchain allows for simultaneous 23

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Technology access to, and input of, information on a database, ensuring both transaction interaction and restrictions at different times in the servicing process. It allows the parties to view and input data which is needed to clarify asset ownership and validate transactions. Presently, there is also typically a need to repeatedly input data to conduct transfers. However, utilizing nascent technology, this would be eliminated because once the information is input into the blockchain, there would be no need for transfers but simply a need to allow for permissioned access to the data stored on it. Note that â&#x20AC;&#x153;garbage in, garbage outâ&#x20AC;? is still a concern; if inaccurate information is entered into the blockchain, it would stay there until there was a modification or amendment of such information. Another use in the servicing process that can be improved by blockchain technology is in regulatory compliance, particularly with regard to a variety of audits. All actions in this technology protocol are transparent; in addition, while data input into it can be modified, data cannot be erased. Therefore, both internal and external auditors can trace the history of loans, documents, uploads, and data through the immutable and unchangeable nature of all documents uploaded using blockchain. Furthermore, data and information (files) uploaded on to a blockchain can be date and time-stamped. Blockchain does not allow these files to be corrupted or changed after the action is initially taken. This ensures compliance with regulations as it can be proven exactly who took what actions and when and why they did so throughout the mortgage servicing process. There are other areas in the mortgage servicing process where the implementation of blockchain technology seems imminent. One of these areas is in proving a secure, electronic storage solution for promissory notes and mortgages. While, to some degree, such a storage solution exists today, it could be enhanced by utilizing blockchain technology.

The MORTGAGE BANKER Magazine

Servicers that utilize an electronic storage solution (referred to by some as a type of electronic registry) could access the database to satisfy requirements for reporting life of loan events for loan payoffs, loan modifications, assumptions, and charge offs. A blockchain based protocol would enable automatic updates of an electronic storage solution when receiving and authenticating electronic notes. In mortgage foreclosure scenarios, blockchain technology can also be helpful in both accepting and giving legal control of electronic notes to a document custodian to initiate the foreclosure process. However, it can also return control of the electronic notes back to the document custodian in the event of reinstatements. Therefore, the creation and continued enhancement of electronic storage solutions for notes and mortgages is simply one example of how blockchain can be used in a beneficial manner to improve one element of the mortgage servicing process.

III. FUTURE USE OF BLOCKCHAIN TECHNOLOGY IN MORTGAGE SERVICING Using blockchain technology throughout different steps of the mortgage servicing process allows for accurate information reporting and delivery and increased efficiency in completing the different time-sensitive steps as required by regulatory regulations. The increased adoption of this technology can only improve the process as it has across several other industries including insurance, healthcare, and education. It has been adopted in related areas to mortgage lending including real estate development and government recordkeeping. The future of the mortgage servicing process can also be similarly improved by the use of blockchain technology if we are willing to embrace blockchain technology and adopt it in various stages of these processes moving forward. MBM

March 2020

Quality Control & Risk Management

QC 2.0

Part 2: Will Advances in Mortgage Technology Over the Next 10 Years Relegate QC to a Minor Role?

MY CRYSTAL BALL SAYS NOT HARDLY By Steve Spies, SWS Risk Advisory

n the last month’s issue of The MORTGAGE BANKER Magazine I laid out a plan for Mortgage QC adapting to the digital state. Digitization enables proactive, profitable, and machine powered QC. However, I make the case that no amount of technology allows crossing the bright line fundamentals of independently validated credit decisions. With that caveat, it’s time to crawl out on that precarious ledge of prognostication and answer the question: Will the mortgage industry achieve the holy grail of instant, reliably validated approvals by decade’s

end? The transition to a real-time fully digital mortgage decision will be long and ultimately realized by a relatively small set of borrowers with uncomplicated employment, banking, and credit profiles. The opposite graphic outlines the next decade’s broad milestones and hurdles in pursuit of digital mortgage origination.

NEAR TERM 1-3 YEARS The industry will have to confront the credit data standardization and quality problem. Tech providers have raced two steps forward by building pipes to a plethora of

The MORTGAGE BANKER Magazine

March 2020

data sources. But it’s time for one step back as most of those sources have questionable controls over data accuracy, and even if correct, consistency in data transmission and standardization is woefully inadequate. The industry can apply lessons from the more rapid advances in appraisal data quality. APIs will continue to make data sharing easier, not necessarily more accurate. Owner occupied limited cash out refinances are another emerging bright spot. Investors already own this risk and models can determine the property’s value

with a high degree of certainty. Lenders can aggressively reduce time and documents when refinancing improves borrower loan terms and debt load. Substantial headwinds remain on purchase transactions. Employment and income data are currently aggregated for at best 30 percent of the underwriting workforce. And itâ&#x20AC;&#x2122;s of questionable reliability because of compilation by third parties who DO NOT warrant employer data accuracy. Do we really see smaller companies with the remaining 70 percent of the work force rushing to

spend money digitizing and standardizing their payroll? Borrowers often need qualifying income from second jobs, and other sources like child support and alimony that donâ&#x20AC;&#x2122;t easily lend themselves to digitization. Add in the explosion of the Gig economy where more and more people are on contract status. Combining these trends together makes determining consistency and continuation of income even more variable and less subject to automation. A direct pipe to the IRS may work for a small subset of stable income borrowers, but history shows tax return data

The MORTGAGE BANKER Magazine

March 2020

quality as stale and suspect as other sources. Asset statement data is also unlikely to be standardized soon. Banks canâ&#x20AC;&#x2122;t even align with payment systems like Venmo, Zelle, and PayPal. Some envision the maturation of the financial passport concept. Consumers voluntarily create digital wallets with up-to-date standardized credit and financial information. Like other automated solutions, the small number of people with stable financial lives may win. But its upside is limited by an increasingly unbanked, uberized workforce already

Quality Control & Risk Management concerned about data privacy. Finally, at best, it’s a jump ball as to whether the potential fraud goes up, not down in the digital world. The old saying “you can steal more money with a pencil than with a gun” just gets revised to “you can steal more money with mobile device than….” Just check out last year’s headlines on cyberspace fraud. Consumers are demanding increasing power over their data, and mortgage lenders cannot assume they will act in their best interest.

MID-DECADE, 3-5 YEARS OUT

The critical inflection point will need to occur. Industry players and data providers will have to embrace and extend the Mortgage Industry Standards Maintenance Organization (MISMO) concept to all parts of the credit file. The next step will be creating incentives for employers, banks, and borrowers to opt-in to standardizing and sharing credit data. By 2025, data quality challenges will continue to limit coverage of potential homebuyers to well south of 50 percent. Appraisals, on the other hand, will approach 80 percent model driven decisions, with only rural, jumbo and unusual properties needing human scrutiny. A much less costly and quicker property inspection fills in any property unknowns. The long-awaited recession likely occurs by 2025, introducing another timeline wild card. A recession finally stress tests new automated processes and controls, and those built to

prevent the last mortgage crisis. How long will it take Fintech to shore up any control weaknesses that emerge?

2030, TEN YEARS OUT

Best case, half of new purchase home buyers may enjoy a true unconditional approval in 24-48 hours. The word conditional is key, as many lenders will claim such a turnaround now. But, oh, that asterisk that currently goes with any instant or fast approval. The fine print usually contains a long list of conditions that must be met before the lender is obligated to honor it. The great news is a dramatic reduction in speed and cost in most other business aspects: E-closing and signatures, doc prep and transmission, workflow and analytics, appraisals and title etc. will all be light years ahead, enabling faster decisions. Underwriting engines will need fewer, but still fully validated data points, increasing near real-time (24-48 hours) decisions to the 50 percent range from today’s low single digits. That may be optimistic because the “mortgage credit profile is like a thumbprint” dynamic increases with expanding borrower mobility and income volatility. Borrower profiles already change dramatically just during the time between application and close. With increasing frequency, borrowers often without telling their lenders, change jobs or add debt after application. In sum, for the largest single financial decision consumers make, “data and done” will not replace

The MORTGAGE BANKER Magazine

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trusted advisors working one-onone with borrowers throughout the loan process. This gives potential homebuyers from across the economic spectrum the best chance of success.

WHAT CAN YOU DO NOW TO WIN AT ALL POINTS ALONG THE CURVE? Here is a simple two-part strategy for building a next generation QC process that both controls and enables the creation of the digital mortgage. 1. Win now—Position your quality assurance and control processes as a real time service provider to the entire enterprise. Capital markets, operations, and sales will all benefit. Mine or adapt your current QC reports to proactively drive profitable manufacturing improvement. 2. Win in the future—adapt your QC to big data only as fast as tech proves its worth. Breathe easy, and don’t fret about keeping up with tech. Stay off the bleeding edge and wait for proven solutions with compelling ROI. Then, use your QC to hold vendors to a blistering accountability for data accuracy. The heart of Mortgage QC 2.0 is a savvy management team that recognizes that QC is a source of immediate cost savings and better customer satisfaction. They use QC to enable you to be a “fast follower” of the accelerating digitization of mortgages by validating vendor claims and ensuring a legitimate ROI. MBM

QUALITY CONTROL GUIDE KEY PERSONNEL & CONTACT INFORMATION Dru Jacobs, President 1-800-888-0456 Sales@adfitech.com www.adfitech.com BUSINESS SERVICES & PRODUCTS

CORPORATE PROFILE Since 1983, Adfitech, Inc. has been the go-to source for premier post-closing and pre-funding quality control services for more than five hundred mortgage lenders, banks, and credit unions throughout the United States. Located in the heartland of America, Adfitech, Inc. is known for concierge-level service in delivering trustworthy results, expert regulatory oversight, and improving overall loan quality for the clients we serve. Adfitech, Inc.’s online reporting and rebuttal platform is the easiest, most transparent online rebuttal process the industry has to offer. Our simple per-file pricing eliminates the need for long-term and minimum contracts, enabling Adfitech, Inc. to operate as your company’s full-service quality control partner. For more information or to schedule a demo, please visit us at www.adfitech.com.

Performing oversight from application to payoff, Adfitech, Inc. offers review service products to meet every need. Post closing Quality Control that meets the requirements of Fannie Mae, Freddie Mac, FHA and VA, as well as, Non-QM/ATR products. Pre-Funding Quality Control to review the accuracy and quality of the loan application and approval before funding. Mortgage Fulfillment to handle the delivery of a complete closed loan file to an investor or collateral package to custodian with imaging and/or file storage options. Servicing Quality Control Reviews consisting of several distinct QC programs based on the areas of servicing in which you wish to identify and control operational risk. Mortgage Due Diligence that is rating agency reviewed and offers Pre-Securitization, Private Transfer, and NPL / RPL reviews.

KEY BENEFITS & VALUE

Experience Counts! With 35 years of service, Adfitech, Inc. is committed to providing timely response to all inquires as well as proactive solutions in order to meet client specific demands. Our innovative approach to client satisfaction allows us to remain agile in an ever-changing industry as we continually work to exceed expectations of our partners. With no long-term or minimum contracts and competitive and simple per-file pricing, Adfitech, Inc. gives your company a full-service quality control department as well as a variableprice solution based on your company’s production volume.

KEY PERSONNEL & CONTACT INFORMATION Claudia Duncan, President 615.591.2528 ext 124 info@qcmortgage.com www.qcmortgage.com BUSINESS SERVICES & PRODUCTS

CORPORATE PROFILE Quality Mortgage Services, LLC (QMS) is a well-established leader of mortgage quality control audit solutions and proprietary mortgage auditing software, MARS (Mortgage Analyst Review Software). With over 20 years of experience and specialized knowledge in the mortgage banking industry, QMS is a boutique risk management and mortgage quality control solutions company that provides full service mortgage loan analysis results for banks, credit unions, lenders, brokers and housing authorities. QMS is a proven industry partner, with a dedicated commitment to our clients. The QMS vow is to shine in customer service, responsiveness, support and flexibility.

The MORTGAGE BANKER Magazine

QMS delivers reports and analytical tools that assist clients in assessing loan quality and maintaining organizational compliance. Our audit reviews are in line with agency requirements and QC services include: Post-Closing, Pre-Funding, Federal Regulatory, Pre-Purchase/Due Diligence, Early Payment Default, Denials, Servicing, Repurchase Defense, HMDA, Anti-money Laundering and MERS® audits. Additionally, QMS offers a secure reverification platform, QCVerify, and our MARS QC software can be leased to manage QC efforts inhouse.

KEY BENEFITS & VALUE Audits, QC plans and verification solutions that meet today’s organizational compliance needs…. We guarantee 4-6-week report delivery. At QMS we are progressive in nature, committed to service, and always evolve to better assist our clients in meeting industry requirements and their unique needs. All solutions are competitively priced and supported by our MARS software, providing transparency to every phase of the quality control process.

March 2020

Quality Control & Risk Management

SECURITY RISK:

Fraudulent Closing Transfer Instructions Stealing Mortgage Pay-Offs By Ted Claypoole & Dominic Panakal, Womble Bond Dickinson

The past decade has seen the growth of an especially painful and pernicious type of fraud. Criminals have been inserting themselves into the middle of real estate closings, sending believable money transfer instructions to the buyerâ&#x20AC;&#x2122;s bank or the escrow agent, and absconding with the money. This money was supposed to pay off the remainder of the sellerâ&#x20AC;&#x2122;s mortgage, and has the potential to affect any mortgage banker. Court cases in this space describe a third party pretending to be a known and trusted vendor and instructing purchase payments sent to a supposedly new account, and the payer bank following that instruction without verifying the account change.1 This article will define and explain this problem, legal underpinnings of claims against The MORTGAGE BANKER Magazine

the criminals, and how companies are guarding against this type of disaster. We also discuss what mortgage bankers should do to minimize their risks of taking the loss for such thefts at the end of the day.

HOW COULD THIS HAPPEN AND HOW CAN WE STOP IT? Consumers, real estate agents, and closing lawyers are vulnerable to these attacks through automated phone calls and phishing text messages. Sophisticated versions of these attacks will trick the recipient into clicking a link or installing or downloading an infected attachment. Bad guys gather information that will make their fraudulent instructions look like they genuinely arise from the appropriate parties, such 30

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as the lawyer handling the closing or the agent representing the buyer. Fraudulent email or other official-seeming correspondence contain wire transfer payment instructions usually regarding the down payment or closing costs. With the money gone, all the parties scramble to avoid being left holding the bag for the error, and forced to pay for their mistakes by paying the home buyers back their missing money. The bank paying the money or the lawyer/agent who was impersonated by the fraudsters are the most likely patsies in the chain, as they dealt most closely with the wrongdoer and had the greatest opportunity to catch the fraud before money was lost. For buyers’ bankers, a confirming phone call to the right party, not using the number on the fraudulent request, but looking up that number directly, is the best move to minimize risk for all parties and to avoid liability for the loss. At this stage, ANY change of payment data or suspicious looking payment request should be questioned with a follow-up call before payments are made. Adding this one step to the mortgage payment process can save immeasurable heartbreak and entirely measurable money losses.

WHAT LAWS ARE VIOLATED?

In 2018, cyber-crime victims across the United States lost an estimated $1.2 billion. In the last quarter of 2018, the companies most targeted received approximately 120 fraudulent emails. In fiscal year 2017, $969 million was either diverted or attempted to be diverted from real estate purchase transactions to fraudulent accounts.2 This criminal conduct falls squarely into the wire fraud statute, but the accounts receiving the payments usually belong to criminals overseas, and out of the reach of U.S. law enforcement according to Rahul Gupta.3 Federal law “prohibits, during and in relation to felony violations of certain laws (including, but not limited to, embezzlement or misapplication of bank funds; fraud or false statements; mail, bank, and wire fraud), the knowing use, transfer or

possession, without lawful authority, of a means of identification, such as an individual’s social security number or date of birth, of another person with the intent to commit a crime.”4 This statute has been used in the past to prosecute fraudulent real estate transaction schemes, upholding wire fraud conviction for transferring $22,000 via wire with the intent to defraud their creditor.5 Why do they target real estate transactions? The Gentleman Thief, Willy Sutton, claimed that he robbed backs because “that’s where the money is.” Think how much money can be skimmed by stealing the final payouts of residential house sales, at least hundreds of thousands of dollars each time. And if you convince the buyer’s bank to transfer to a safe account overseas, or you can quickly move the money to one remotely, then the risks are minimal. Home sales involve significant amount of money that can be easily diverted. The median price of homes that have sold now exceeds $220,000.6 The market value of the commercial and industrial real estate in the United States is approximately $2.655 trillion, according to the Real Estate Investor's Deskbook § 1:5 (3d ed.). Because there are multiple parties in every real estate transaction with no definite party to always provide payment information, that data may come to the payor bank from the closing lawyer, the alleged receiving bank or mortgage company, any real estate agent in the transaction, or from the buyers themselves; fraudsters can rely on the confusing array of options to fool a payor bank. Much of the information a bad actor needs to impersonate the parties and launch this fraud can be found online. The issue of wire fraud in real estate is metastasizing. The FBI reported that from 2015 to 2017, there was over an 1,100 percent rise in the number of crimes using business e-mails in the real estate transaction context and an almost 2,200 percent rise in the reported monetary loss.

Quality Control & Risk Management WHAT IS BEING DONE ABOUT IT?

The FBI also reported nearly $150 million in real estate fraud losses in 2018. According to the FTC, consumers reported losing $1.48 billion to fraud in 2018, which marks an increase of 38 percent over 2017. The FTC defines wire fraud is any event where an individual is tricked into sending money via wire transfer to a fraudster. As participants in real estate transactions, lawyers and real estate brokers are vulnerable to information theft leading to impersonation. According to the Ponemon Institute’s report, 2017 State of Cybersecurity in Small and Medium Sized Businesses, 61 percent of small businesses experienced a cyberattack in 2017, up from 55 percent in 2016. That same research indicated that 43 percent of malware victims are small businesses. During the course of a recent real estate transaction, an associate of a large North American law firm wired $2.5 million of a client's money to a Hong Kong bank account.7 Cybercriminals had set up the account and induced the associate to send the funds by pretending to be employees of a legitimate mortgage company.

State and local governments are beginning to raise awareness of the issue of wire fraud in the real estate industry. The Utah Division of Real Estate, for example, launched a campaign to call attention to email scams that “target property transactions to force people into wiring down payments and other high dollar real estate proceeds to con artists’ accounts.” According to its website, the Colorado Division of Real Estate at the Department of Regulatory Agencies also warned Colorado consumers to “beware of a national cyber-scam currently taking place that steals money directly from home buyers and sellers.” In July 2019, American Land Title Association, Community Mortgage Lenders of America, American Escrow Association, Real Estate Services Providers Counsel, created a group called a Coalition to Stop Real Estate Wire Fraud. The group has a stated goal of educating consumers and real estate professionals about the risks of wire fraud. However, much of the risk of these crimes can be reduced or eliminated by a few extra incidences of careful communication between the payor bank and either its client or the client’s representative in the transaction. The bad guys profit from the complexities of the payment instruction process and lazy assumptions made by all parties. Minimizing your risks of this fraud may be as easy as a phone call. MBM

WHAT ABOUT INSURANCE?

Victims of this type of crime may expect their insurance to assist in compensating for the stolen payment. However, the insurance industry has made adjustments as a result of the prevalence of this crime. Direct mail or email fraud is generally not covered under cyber insurance policies, even though the crucial information to impersonate a legitimate party may have been secured through hacking or phishing. A payor bank’s errors and omissions policies may cover this, although more insurance companies are requiring a set of procedures to confirm payment destinations before money is sent. If your bank does not have the right procedures, it may not be insured for the loss. Insurance companies have reacted to this wave of crime by adjusting coverage types and caps to minimize their exposure. Bankers, buyers, brokers, and lawyers should carefully review their insurance policies to find coverage, risk allocation, and coverage limitations. The MORTGAGE BANKER Magazine

END NOTES Am. Tooling Ctr., Inc. v. Travelers Cas. & Sur. Co. of Am., No. 16-12108, 2017 WL 3263356 (E.D. Mich.), appeal docketed, No. 17-2014 (6th Cir. Aug. 29, 2017) 1

TXCLE-ARED 5.I, 2018 WL 3447285. In 2016, $19 million in wire transfer frauds affected home buyers. Id. 2

Business Email Compromise (BEC): The Cyber Crime Threat Turning Dreams into Nightmares, Orange County Law., August 2019 3

18 U.S.C. § 1028A

United States v. Van Doren, 800 F.3d 998 (8th Cir. 2015)

50 No. 4 Mortgage & Real Estate Executives Report NL 2

30 No. 6 Tex. Emp. L. Letter 6

March 2020

Moving Beyond Quality Control QMS delivers on all of your mortgage QC and audit technology needs. An industry standard, Quality Mortgage Services (QMS), continues to evolve as you do. Offering a robust line of quality control and audit services, delivered through the innovative MARS, Mortgage Analyst Review Software, QMS provides solutions that are designed to meet your individual needs, as well as those of the industry. QMS prides itself on being a genuine partner, with a demonstrated track record of commitment to providing an exemplary customer experience, in addition to proven workflow, process automation, analytical tools, reporting, and audits for QC. QMS is THE MORTGAGE QUALITY CONTROL AND AUDIT TECHNOLOGY SOLUTIONS COMPANY, extending professional results and flexible solutions to assist you and your team in navigating mortgage compliance. Whether you’re looking for a partner in QC, or considering outsourced processes, we are here to help.

QMS covers the full cycle of QC.

• QUALITY CONTROL AGENCY AUDITS • POST-CLOSING • PRE-FUNDING • MERS® • OTHER UNIQUE AUDITS

• QC VERIFY REVERIFICATION SERVICES • REVERIFICATION BUNDLING SERVICES AND FULL FOLLOW UP

• QC SOFTWARE TECHNOLOGY • INTUITIVE WEB-BASED AUDIT TECHNOLOGY SOLUTIONS

For more information, visit qcmortgage.com

Compliance

IS IT TIME TO RE-EVALUATE YOUR CMS?

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

hirty-five years ago, I was the compliance officer (CO) for a midsized bank. At that time, COs were relegated to the deep recessed corridors of the company, had the furniture that wasn’t pretty enough for the bank lobby, and when the examiners showed up, were taken into the light so the Board could say “See, we have a CO.” I was actually housed in a basement for a while with dust bunnies the size of a small horse. The first industry melt-down occurred in the late ’80s liberating COs to a cubicle. This was followed by the next industry hiccup in the early ’90s followed by the mid-2000s. These hiccups built up and continue to reinforce to executive management that a strong and well-documented compliance management system (CMS) is something everyone needs to have in place.

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Sometimes even the most seasoned compliance professional needs to, or should, take a step back and re-evaluate their institution’s CMS. When was the last time you completely re-evaluated your CMS? Have operations or sales made changes within their programs, which may include using a new vendor with whom you share customer information? Are LOs getting the Taxpayer First Act disclosure signed at the pre-qual process? A CMS program is more than answering a few questions: CMS documented in paper —check; training program—check; complaint monitoring—check; or, policies and procedures—check. Those issues are important to have in place, but what about the bigger picture? Do you have monitoring and testing in place based on an assessment of risk? Where in the heck would this be document? When I accepted the job at my current employer, the first thing I did was start interviewing

March 2020

the managers and various department personnel. This process took weeks but was well worth the effort. From the interviewee’s perspective, my questions were invasive and annoying. They don’t call me “Flea” for nothing! Talking to personnel allowed me to ascertain what they did and didn’t know about the routine they followed with each loan. Routines are good but they tend to become, well, routine. The individual loses interest in compliance flags or warnings and starts to ignore them completely. Nothing substitutes a good training program and that interview

process opened my eyes to additional training opportunities. This groundwork allowed me to develop an outline of the flow of a loan throughout the manufacturing process. Of utmost importance was identifying the automated controls that were in place vs. those that are a flag (reminder) vs. processes that rely heavily on training. I also discovered the multiple ways people had invented to arrive at the same goal: A closed loan. I then created a diagram of the flow of the loan. The result looked something like this:

Application Process Map In-house application, all 6 items received

December 2017

Application date auto populates in E360 – going to lock down the ability to back date.

Customer

If online application, Esign consent question built in. If customer email received & Esign consent obtained

Loan Estimate Expires Alert, if applicable.

Customer opens disclosures

Application

Customer does not open documents with consent – Mailbox rule applies

If not online application, E-consent alert when borrower name and email address is entered on the application. LMP must send econsent disclosure to customer.

Encompass automatically pre-sets dates regardless of delivery mechanism

Intent to proceed

End/LMP to requests file cancellation

YES

MLO

Disclosures requested or Re-disclosures TILA RESPA ECOA FACTA Privacy/GLBA HMDA State Esign Fair Lending

NO Once e-consent is received, date auto populates in E360.

Collect Appraisal funds

Disclosures sent via snail mail

4 day mailbox rule will apply for delivery if we have e-consent and the disclosures are not opened.

Mavent Run

Alert – If Mavent fail, caution trigger/runs on automated basis every time upon save of the loan file @ milestone completion.

Processing

• • • • • • • • •

Initial disclosures alert sent. Initial disclosures due in 3 day period. Alert stays present if not physically sent to customer. 48 hour queue in Encompass if MLO doesn’t order Disclosures disclosures. sent electronically YES thru secure delivery method

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March 2020

Hard stop – Data verify for required fields to be completed before milestone handoff to Processing.

Proceed to Disclosures & Processing

Processing Milestone LMP read only access to loan data.

Compliance This simple chart spoke volumes:

A functioning CMS mitigates risk. It allows your organization to develop a process to manage regulatory changes quickly and efficiently with the added benefit that you know where a new box needs to be placed in the flow chart. Another benefit of the one-on-one interviews? Getting to know your personnel and sending the message that you are genuinely concerned about their job and how they are doing it. Priceless.

• The type of control, such as consumer focus, risk related, regulatory, etc. •

Is the control automated or manual? Remember that an automated control (aka hard stop) is not good enough and will never serve as a substitute to training and knowledge. Systems can and do have hiccups and it feels great to know the sharp eye of personnel can catch a hiccup in the system because of their training. As the recipient of several CFPB exams and many more state exams, I know examiners will tell you that hard stops are good, but they cannot replace old fashioned knowledge.

The Cannabis Industry is a hot topic lately. No pun intended. And see how nicely I transitioned from something stressful as the CMS program to something calming (so I’ve heard)? The marijuana business is now legal in many states and still more states have medicinal marijuana laws on the books. Unfortunately, there still exists conflicts between state and federal laws placing the banking community and independent mortgage bankers in the precarious position of trying to provide financial services to participants, employees, and the business in general. The hybrid oils and by-products of the hemp industry post additional challenges in legitimately separating them from actual cannabis. This industry is garnering significant revenue and opportunities for employees if only they could buy homes from these gains. Unfortunately, the secondary market has not embraced this income source, which includes the actual self-employed borrower and employees. The exclusion can extend to the outlier businesses catering to the industry. Points to ponder if you are opening the door for lending to employees in this area should focus on:

• Testing of any hard stop in the system. Can I cause the system to hiccup and forget a step? Trust me when I state that there is a creative person within your organization who can and will find a short-cut around a process. • The frequency and the documentation going out. Are we missing disclosures? • If the system issued a simple flag/reminder on a loan, the mapping process allowed me to ascertain whether this needed to be a hard stop to comply with or could remain as a flag. • The frequency of the control. Did the CHARM booklet go out on every loan or is it issued only when the transaction was truly an ARM loan? • I compared my diagram to policies and procedures for a match in processes and activities. SURPRISE, initially there was no match.

• Making sure your investor(s) will accept a borrower whose income is derived from this industry and making sure there are no loopholes that a loan originator, underwriter, or closer could miss rendering the loan un-saleable. There are only 2-3 investors that consider buying the loan and with very strict rules, for example, W2 employee who has filed tax returns. The FNMA will consider the loan only if the person isn’t the owner that grows/sells. They will discuss specific loans with them via their underwriting help line.

• I even looked backward in time and looked at the LOS’s recent updates to ensure any “fix” they implement was functioning correctly. Sometimes they are not vetted as thoroughly as they should be. I went on to create one of these charts for all areas of the company: Pre-qualifications/prospects, application (all six items), disclosures, set-up and processing, underwriting, brokering a loan, the cancellation queue (withdrawn & declined loans), lock Desk, on-boarding and off-boarding, closing, and post-closing. The MORTGAGE BANKER Magazine

• The BSA/AML aspect and requirements that still exist: A limited SAR. How are you going to 36

March 2020

cover this in your BSA/AML program under the money laundering aspect since, by default of the industry not being legal under federal law, this could be construed as money launder? Which routes you back to the first bullet point: Will the investor reject the sale of the loan?

the utmost in professionalism. The door is open for these clients to possibly sue on their own. Seriously, remind staff to simply reply “Federal and state privacy laws prohibit us from replying in a public venue. We would be happy to discuss with you in private.” Simple and non-confrontational. In case you missed it, the new deadline to begin using the revised URLA is November 1, 2020. An interactive URLA form (Fillable PDF) was supposed to go live on the FNMA’s website in January 2020, but I have not confirmed that. Full functional testing is scheduled to start March 2020. June 1 through August 31, 2020 have been designated as a test phase with the GSE’s accepting the MISMO V3.4 loan application submission files on a limited basis. Starting September 1, 2020, all lenders may submit the MISMO loan application files to the GSEs’ AUS production environments and begin using the redesigned URLA. Be sure to visit the FNMA’s dedicated URLA page or the FHLMC’s dedicated page on this subject, and to read current developments about the new URLA form. Also, make sure you stay in close contact with your LOS provider relative to its implementation date meeting the new requirements. November 1, 2021 will be the sunset date for the old URLA. Did you set a flag in February to make sure the Taxpayer Relief Act permission/disclosure was in place in January? If not, now is a good time to issue a reminder. With some areas of the country deep in snow, now is a good time to poke loan originators to knock out their 2020 continuing education requirements while sitting around that toasty fire. The CA DBO passed SB 1235 requiring commercial loan disclosures. It’s worthy of a peek at the requirements and an opportunity to provide the CA DBO with comments on the rule. Comments can be submitted to regulations@dbo. ca.gov. CFPB re-issued the Loan Originator Rules Compliance Guidance (November 2019 update).

• Strict policies and procedures that identify and address how to handle the potential connections to this industry, such as a borrower whose sole source of income is from selling hydroponic equipment to cannabis growers, consultants, and attorneys that cater to the industry, etc. Are you going to require verification of the entities’ licenses to do business and learn the depth of the various cannabis licenses? • The California Department of Business Oversight (CA DBO) has issued cannabis lending guidance for state-chartered financial institutions. Worth the read and how you can apply certain aspects to mortgage banking. • Industry groups have seminars available that may be worthwhile to invest an hour of your time.

CURRENT EVENTS AND TRIGGERS Does anyone remember discussing current events in your social studies or civics classes? Am I that old? I miss ‘Show and Tell’ too. The best current event was the January article from the FTC stating that in a complaint filed by the DOJ, a loan broker had to pay a $120,000 fine. It seems the loan broker responded to negative social media reviews by revealing nonpublic information about the person making the complaint. His posts would reveal their delinquent credit down to the entity the to which the payments were late, credit scores, and enough information to allow identification of the consumer. Not only did his actions violate GLBA but they violated California’s strict privacy rules. Now is a good time to restate to loan staff the need to resist the urge to reply to any negative review with any comments other than those with The MORTGAGE BANKER Magazine

MBM

March 2020

Compliance From the Desk of the ‘Om-Bobs-man’

"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.

You’ve Got to Fight for Your Regulator

e need to fight for state regulators and the supervisory role they fulfill every day because a federal regulatory panel has increased oversight of mortgage companies. According to Financial Stability Oversight Council, in their 2019 annual report, nonbank mortgage companies pose significant risk to the U.S. economy and oversight of nonbank lenders much be strengthened. The Financial Stability Oversight Council, commonly referred to as FSOC, was created by the Dodd-Frank Act with statutory authority to identify risks and respond to emerging threats to the nation’s financial stability. FSOC is chaired by the Secretary of the Treasury with an extensive list of federal regulators. Only one state banking regulator, one state insurance regulator, and one state securities regulator are included, each in non-voting roles. This council seemed unaware of the growth of nonbank mortgage companies and increased share of the national mortgage origination and servicing since the financial crisis and regulatory reforms incorporated in years following. In a September meeting, three invited guests presented to

the council on business mortgage models, growth of nonbank mortgage lenders, and reluctance of banks to originate higher loans to value or riskier mortgages. The presentations took a turn to focus on the perceived ‘fragilities’ of nonbank mortgage companies and their reliance on short term funding and fewer resources to absorb the shocks during periods of economic stress. The minutes of the meeting then describe how the “regulatory framework for these nonbanks is fragmented among federal and state regulators.” Robert Broeksmit, president and CEO of the Mortgage Bankers Association (MBA) responded in a statement, “We appreciate that the FSOC report recognizes these important facts, and we believe it calls for policies that strengthen the sector and deepen overall market liquidity, not simply force market share away from IMBs” His comment refers to the 900 or so larger independent mortgage bankers recognized by FSOC. Luckily, FSOC adopted a rule stating the council shall not amend or rescind its interpretive guidance on nonbank financial company determinations without providing public notice

The MORTGAGE BANKER Magazine

March 2020

and provide an opportunity to comment. This is good news but also a challenge as any call for increased oversight beyond harmonized supervision within the existing network of state and federal regulators must be answered. That answer will certainly come from the MBA and the majority of IMBs. But our response will also be needed as any impact of increased oversight will be felt by all companies and, in turn, licensed mortgage originators. For the record, nonbank mortgage lenders have been financing the American Dream for nearly 140 years. A recent MBA report on IMBs describes how IMBs rise in times of need and fill gaps when bank lenders retreat or realign business focus to meet return requirements for stockholders. Further, IMBs have traditionally been the leading resource for first-time homebuyers, FHA, and VA lending. One last fact that needs to be understood by FSOC and all: Nonbank mortgage companies are subject to the same consumer protection regulations and oversight from state and federal agencies as other mortgage lenders, maybe more. MBM

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Compliance

Compliance Alphabet Soups Each month we will serve up cans of Alphabet Soup applicable to the mortgage industry. Each flavor of Alphabet Soup will include the soup’s acronym and its actual name, and a hyperlink to the regulation, law, or rule from the agency that administers it. It’s all right here; relax and enjoy reading your favorite bowl of Mortgage Compliance Alphabet Soup.

The Home Mortgage Disclosure Act The Home Mortgage Disclosure Act was enacted in 1975, and codified as the Federal Reserve’s Regulation C – Home Mortgage Disclosure Act (HMDA). In July 2011, rule-writing authority for Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB). The HMDA requirements are intended to provide the public with data about certain applications for loans and their ultimate dispositions. The data can be used: • To help determine if financial institutions are serving the housing needs of their communities; • To assist public officials in distributing public-sector investment to needy areas as an inducement to private investment; and • To assist in identifying potential discriminatory lending patterns and enforcing antidiscrimination statutes. Regulation C requires specific financial institutions to collect, record, report, and disclose information about their mortgage lending activity. It also requires those institutions to disclose certain HMDA data to the public. Regulation C and HMDA are considered part of the consumer protection laws and regulations; however, if the transaction meets the HMDA reporting requirements, it is covered whether the purpose of the application or loan is for consumer purpose or business purpose. Covered institutions must collect certain data regarding applications their mortgage lending activity for each calendar year. The collected data must be recorded, within thirty calendar days after the end of the calendar quarter in which final action is taken (such as origination or purchase of a loan, or denial or withdrawal of an application), on a loan application register (LAR) in a prescribed format. The HMDA reporting requirements include timely and accurate compilation of the information and reporting the calendar-year data to the appropriate regulatory agency by March 1 of the following calendar year. Once the data has been submitted to the Federal agency, reviewed for accuracy and field validation, and any discrepancies have been resolved, the institution receives a report (‘disclosure statement’) compiled from its submission. Disclosure requirements for public review are also mandated. The CFPB issued a final rule for Home Mortgage Disclosure Act (HMDA) reporting. New data collection requirements began January 1, 2018, and the 48 new, revised, and current data points will first be reported in 2019. There are 25 new data points, 14 fields modified from previous requirements, and nine unchanged, bringing the total to 48 unique data fields. The new rule entails many changes and revisions, and some of them involve revisions to: • Institutional coverage • Transactional coverage – the new rule modifies the types of transactions in that Regulation C generally applies to consumer-purpose, closed-end loans and open-end lines of credit that are secured by a dwelling. Also, a home improvement loan is not subject to Regulation C unless it is secured by a dwelling. Additionally, the new rule applies to business-purpose, closed-end loans and open-end lines of credit that are dwelling-secured and are home purchase loans, home improvement loans, or refinancings.

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March 2020

• Applicant information collection and reporting • Annual reporting • Disclosure requirements The Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA) was signed by the president on May 24, 2018, which amended the HMDA by adding a section that provides partial exemptions from HMDA’s requirements for certain transactions made by certain financial institutions. Shortly thereafter, the CFPB released an interpretive and procedural rule that further clarified the changes: • For a financial institution to qualify for the partial exemptions, it must have originated less than 500 closed-end mortgage loans in each of the two preceding calendar years, or it must have originated less than 500 open-end lines of credit in each of the two preceding calendar years, and it has at least a ‘Satisfactory’ CRA rating. • Upon qualification for the above partial exclusion, a financial institution is exempt from the expanded HMDA data requirements which are 26 items that do not have to be collected and reported retroactive to January 1, 2018. The FFIEC recently posted the 2020 Guide to HMDA Reporting, resource for assisting all financial institutions in their HMDA reporting. It includes a summary of responsibilities and requirements, directions for assembling the necessary tools, and instructions for reporting HMDA data. The 2020 edition reflects updates to incorporate content from the HMDA Rule issued by the CFPB in October 2019. It addresses reporting due March 1, 2021, of application and loan data for calendar year 2020. ADDITIONAL RESOURCES: CFPB Home Mortgage Disclosure (Regulation C) Small Entity Compliance Guide Interpretive and Procedural Rule

The MORTGAGE BANKER Magazine

March 2020

GREs, Regulatory and Government Agencies FHA TRAINING AND EVENTS

There is no charge for training courses and webinars offered by the Federal Housing Administration Course Title:

FHA Credit Underwriting Training

Date/Time:

Tuesday, March 17, 2020 & Wednesday, March 18, 2020 8:30 AM to 4:30 PM (Central) Check-in begins 30 minutes before the start of the session.

Event Location:

La Vista Conference Center Sugarloaf Room 12520 Westport Parkway La Vista, NE 68128

Jurisdictional Host:

Denver Homeownership Center

Registration Link:

March 17, Click Here March 18, Click Here

Description:

This free, on-site training will provide an overview of FHA underwriting procedures and address various industry-related frequently asked questions (FAQs) related to FHAâ&#x20AC;&#x2122;s Single Family Housing Policy Handbook 4000.1. This training will also take an in-depth look at a variety of topics including: credit, income, and asset (CIA) documentation; manual underwriting; automated underwriting systems (AUS); endorsement protocols; the Loan Review System (LRS); and more.

Audience:

This training is targeted primarily to direct endorsement (DE) underwriters; however, other seasoned mortgage lending professionals, including loan processors, closing/shipping personnel, may also benefit from attending.

Special Instructions:

Advance registration is required no later than March 10, 2020. Seating is limited and available on a first-come, first-served basis. Registrants must include their email address.

For additional information, contact Deborah Byers via email at deborah.a.byers@hud.gov, or via phone at (800) 225-5342.

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March 2020

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GREs, Regulatory and Government Agencies

FHFA PROPOSES UPDATED MINIMUM FINANCIAL ELIGIBILITY REQUIREMENTS FOR FANNIE MAE AND FREDDIE MAC SELLER/SERVICERS The Federal Housing Finance Agency (FHFA) has proposed updated minimum financial eligibility requirements for Fannie Mae and Freddie Mac Seller/Servicers. The updated minimum financial requirements will further strengthen the Enterprises' Seller/Servicer requirements and provide transparency and consistency of capital and liquidity required for Seller/Servicers with different business models. A key improvement from the minimum financial requirements established in 2015 is that the new Enterprise standards establish financial requirements for the servicing of Ginnie Mae mortgages. FHFA is releasing the proposed requirements to provide transparency and consistency to industry participants and other stakeholders. FHFA and the Enterprises will engage with servicing industry participants, regulators and other stakeholders to obtain their feedback. FHFA will receive input on these requirements for 60 days at ServicerEligibility@fhfa.gov.The 60-day period will end on March 31. After reviewing industry and stakeholder feedback, FHFA anticipates finalizing these requirements in the second quarter of 2020, and anticipates that the requirements will be effective six months after they are finalized. Below are some frequently asked questions about the updated minimum financial eligibility requirements for Fannie Mae and Freddie Mac Seller/Servicers:

The MORTGAGE BANKER Magazine

March 2020

FREQUENTLY ASKED QUESTIONS: UPDATED ELIGIBILITY REQUIREMENTS FOR ENTERPRISE SINGLE-FAMILY SELLER/SERVICERS 1. WHY

ENTERPRISES UPDATING THEIR MINIMUM FINANCIAL REQUIREMENTS FOR SINGLE-FAMILY SELLER/SERVICERS?

â&#x20AC;¢

ARE THE

ELIGIBILITY

The updated financial requirements further improve Seller/Servicer standards and provide transparency and consistency of the capital and liquidity required for Seller/Servicers with different business models. A critical improvement from the minimum financial requirements established in 2015 is addressing the risk factors related to servicing Ginnie Mae mortgages. The updated requirements improve the safety and soundness of the Enterprises by strengthening Seller/Servicer counterparties in the event of an economic downturn.

2. WHAT

HAS CHANGED FROM THE MINIMUM FINANCIAL ELIGIBILITY REQUIREMENTS

ISSUED IN

2015?

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March 2020

GREs, Regulatory and Government Agencies

3. WHEN WILL THE UPDATED MINIMUM SELLER/SERVICERS BE EFFECTIVE? • • •

SELLER/SERVICER REQUIREMENTS?

•

ENTERPRISE

FHFA anticipates finalizing these requirements in the second quarter of 2020 and anticipates that the requirements will be effective six months after they are finalized. Enterprise Seller/Servicers must fully comply with all components of the minimum financial requirements by the effective date. Seller/Servicers that do not comply with the updated minimum financial requirements as of the effective date may be considered for a transition period, subject to the Enterprises’ discretion.

4. WHAT •

FINANCIAL REQUIREMENTS FOR

IF A

IS UNABLE TO MAINTAIN THE MINIMUM FINANCIAL

Consistent with current practice, if a Seller/Servicer does not maintain compliance with the minimum financial requirements, the Enterprises will have the discretion to take appropriate action. A Seller/Servicer should contact its Enterprise customer account manager to discuss this question further.

5. HOW

FREQUENTLY WILL COMPLIANCE OF THE MINIMUM FINANCIAL REQUIREMENTS

BE TESTED?

•

Seller/Servicer compliance with the minimum financial requirements will be reviewed on a quarterly basis by the Enterprises.

6. WILL SELLER/SERVICERS IMMEDIATE

ENGAGED IN SERVICING TRANSFERS BE REQUIRED TO BE IN

COMPLIANCE WITH THE NEW MINIMUM REQUIREMENTS AFTER THE

EFFECTIVE DATE?

•

Yes. The Enterprises will continue to assess whether both the Transferor and the Transferee Servicer meet the minimum requirements as a result of the transaction in addition to other requirements.

7. COULD SELLER/SERVICERS

HAVE FINANCIAL REQUIREMENTS IN EXCESS OF THE NEW

MINIMUM FINANCIAL REQUIREMENTS?

•

Yes, the Enterprises may institute requirements beyond the minimum financial requirements for certain Seller/Servicers due to situations including but not limited to overall complexity, or other evidence of heightened risk embedded in the business model or financial condition.

F E DE RA L HO U SI N G F I N A N C E A G E N C Y • F HF A . go v The MORTGAGE BANKER Magazine

March 2020

8. DO

THESE NEW MINIMUM FINANCIAL REQUIREMENTS ESTABLISH A REGULATORY

STANDARD FOR NON-DEPOSITORY

•

SELLER/SERVICERS?

No. These are new minimum financial requirements for approved non-depository Seller/Servicers to engage in business with the Enterprises. Financial regulatory requirements for non-depository Seller/Servicers are the responsibility of applicable regulators.

9. ARE

DEPOSITORY INSTITUTIONS TESTED AGAINST THE NEW MINIMUM LIQUIDITY

STANDARDS?

•

10.

No. Depository institutions have existing regulatory liquidity requirements that the Enterprises will continue to use in assessing financial eligibility. Therefore, only non-depository institutions will be tested against the new liquidity requirements.

WILL

SUBSERVICED LOANS BE INCLUDED IN THE SUBSERVICER’S MINIMUM

FINANCIAL

•

11. •

12.

•

13. •

REQUIREMENTS?

No. The requirements apply to loans where the Servicer serves as Master Servicer. Loans that are subserviced are not applied to either the capital or liquidity requirement, however a subservicer must be an Enterprise-approved servicer. All Enterprise-approved Servicers must meet the minimum net worth and tangible capital ratio requirements.

THERE AN EXCEPTION PROCESS TO THE NEW MINIMUM FINANCIAL

REQUIREMENTS?

The Enterprises may review Seller/Servicer requests and make exceptions where warranted.

WHAT IS THE MSR VALUES PORTFOLIOS?

IMPACT OF THE UPDATED MINIMUM FINANCIAL REQUIREMENTS ON AND

SERVICERS’

WILLINGNESS TO GROW THEIR SERVICING

The Enterprises carefully considered these impacts and believe the requirements are appropriate and provide the right balance between managing counterparty risks and encouraging investments in the servicing business.

THERE A DIFFERENTIATION IN THE MINIMUM LIQUIDITY REQUIREMENT BETWEEN

REMITTANCE TYPES?

No. Presently, there is not a differentiation in the minimum liquidity requirement between scheduled and actual remittance types although the Enterprises will continue to evaluate the requirement on an ongoing basis to determine whether a differentiation should be made.

F E DE RA L HO U SI N G F I N A N C E A G E N C Y • F HF A . go v The MORTGAGE BANKER Magazine

March 2020

GREs, Regulatory and Government Agencies

14.

WHAT

CAPITAL

•

15. •

GINNIE MAE REQUIREMENTS?

WILL HAPPEN IF

CHANGES ITS ISSUER/SERVICER LIQUIDITY OR

FHFA will work with the Enterprises to reevaluate the Servicer Eligibility component that pertains to Ginnie Mae servicing portfolio, and issue changes where appropriate.

WHAT

SHOULD A

SELLER/SERVICER

DO IF IT HAS ADDITIONAL QUESTIONS ABOUT

THE PROPOSED MINIMUM FINANCIAL REQUIREMENTS?

FHFA and the Enterprises will conduct outreach with industry trade associations, regulators, a representative group of Seller/Servicers, and other stakeholder groups as appropriate. Seller/Servicers should forward any inquiries to its customer account manager at either Enterprise, or send inquiries to ServicerEligibility@fhfa.gov.

DEFINITIONS

E NTERPRISES – Fannie Mae and Freddie Mac A GENCY

SERVICING – the aggregate UPB (unpaid principal balance) of single-family mortgages serviced for Freddie Mac, Fannie Mae, and Ginnie Mae by the Seller/Servicer

L IQUIDITY

– includes the sum of:

a) Cash and Cash Equivalents (Unrestricted) b) Available for Sale (AFS) or Held for Trading (HFT) Investment Grade Securities: • Agency MBS • Obligations of GSEs • US Treasury Obligations

N ON - PERFORMING

LOANS – includes loans 90 or more days delinquent and loans in the foreclosure process

S ERVICING UPB – UPB of single-family residential mortgages serviced by the Seller/Servicer T ANGIBLE N ET W ORTH

– total Equity Capital as determined by Generally Accepted Accounting Principles (GAAP), less goodwill and other intangible assets (excluding mortgage servicing rights), and a deduction of “affiliate receivables” and “pledged assets net of associated liabilities”

F E DE RA L HO U SI N G F I N A N C E A G E N C Y • F HF A . go v The MORTGAGE BANKER Magazine

March 2020

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Legal

The Mortgage Counselor Mitchel H. Kider is the Chairman and Managing Partner of Weiner Brodsky Kider PC, a national law firm specializing in the representation of financial institutions, residential homebuilders, and real estate settlement service providers.

No – Not Everybody Is Doing It

n more than three decades of advising the industry, one thing I never fail to hear is, “well everybody else does it, so it must be allowed.” In other words, my business is compliant because I’ve seen other companies doing the same thing. While copying others may be tempting to save on legal and compliance costs in the short term, the unfortunate reality is that simply doing what you perceive your peers are doing will cost you more in the long run. There are several reasons that this approach does not work. First, it may not be true that “everyone else” is doing it, because the peer companies you observe may represent a very small portion of the overall market, and everyone else is complying. To say it another way, instead of being in good company with several others that have the same practice, regulators may look at you and the others as being the compliance outliers. We frequently see regulators, such as the CFPB, go after a sector of the industry for similar compliance violations.

Second, you may see other companies doing something and assume that you are doing the same thing, but the other companies are actually doing things differently, or documenting their compliance, in a way that you cannot see. For instance, you may feel comfortable entering into marketing services agreements (MSAs) with real estate companies because other lenders also have MSAs. But what you don’t know is that the other companies conducted detailed legal and compliance analysis under RESPA and have ensured that the specific services they are paying for are “compensable” under official guidance; the amounts paid are supported by independent valuations; and, the provision of the services is appropriately documented. While you may see your practice as the same as theirs, the reality is that a regulator would have a much easier time bringing an enforcement action against you if you did not jump through the same hurdles. Similarly, in the case of

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March 2020

buying leads, the perception of what’s going on with your peers is often different than what’s compliant. While the sale of leads themselves is legal, the ways that lead purchases sometimes work in the real world can be dangerous territory. You need to make sure that you are really buying leads and not referrals that someone is calling leads. You also want to ensure that there aren’t referrals taking place in the relationship, in addition to the sale of leads. Similarly, both lead sales and things that service providers may market as “leads” implicate other laws as well, including the Telephone Consumer Protection Act, state and federal privacy regulations, and the Fair Credit Reporting Act. If you try to free ride on your peers’ compliance analyses, you may be missing additional considerations that they are working hard to comply with behind the scenes. Third, even if you are correct that the majority of the industry is doing the same thing, there have been numerous instances where a practice was common

in the industry for years before regulators and/or plaintiffsâ&#x20AC;&#x2122; attorneys began to target that practice. For example, captive mortgage reinsurance was explicitly permitted by HUD guidance and was commonplace for a significant amount of time before class actions and ultimately CFPB enforcement challenged the practice. RESPA allows captive mortgage reinsurance, if structured correctly. Yet numerous companies faced regulatory and litigation exposure, which required them to demonstrate they had undertaken careful regulatory analyses and that appropriate amounts were being paid for bona fide reinsurance. In light of all of this, it is vital

It is vital that companies employ sufficient compliance staff and empower them to look beyond what others are doing (or not doing), to ensure that practices are compliant. that companies employ sufficient compliance staff and empower them to look beyond what others are doing (or not doing), to ensure that practices are compliant.

Write? Right! Pen an article and we will help you publish your expertise. April 2020 is waiting for you! Contact: Editor@Twelve11Media.com

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March 2020

While imitating others may save a little bit of money in the short term, it can be costly in the long term, making your company the low-hanging fruit for regulators and class actions. By investing sufficiently in your internal compliance function to identify problems and make decisions about compliance risk ahead of time, and by seeking legal advice when appropriate, you can put yourself in a position not only to make good decisions about the types and level of risk youâ&#x20AC;&#x2122;re comfortable with, but also to give yourself the opportunity to do the often simple things that you can do to minimize or mitigate the risks that you do decide to take. MBM

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.

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March 2020

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.

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March 2020

The C-Suite "I love overcoming obstacles and finding a way to meet each customerâ&#x20AC;&#x2122;s unique needs."

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March 2020

JAMES SEELY

Residential Mortgage Services President & CEO What do you find most rewarding about your job?

What do you think is the biggest challenge for the mortgage banking industry currently?

The most rewarding thing about my job is collaborating with everyone who interacts with our organization, to achieve the goal of home ownership. This is very rewarding work. I love working with my RMS colleagues, our vendor partners, and our customers – overcoming obstacles and finding a way to meet each customer’s unique needs.

One of the biggest challenges I see in the industry today is the volatility in the financial markets. This volatility creates multiple challenges. Some of those include margin compression, consistency in staffing, and whether an independent lender will retain servicing or not.

Our core value of focusing on the customer first, along with our collaborative approach, have allowed us to become a leader in the markets we serve. What is the last thing you do at night?

Make sure there is a pad and a pen on my nightstand (you never know when you might get something figured out).

What time do you get up? 5:30 am

What time do you go to bed?

What is the first thing you do in the morning?

10:00 pm

I make my bed!

What is your mantra?

The credit belongs to the person in the arena, and it’s not the critic that counts.

What is on your desk?

A picture of my family, a business card holder, and a famous quote from Thomas Jefferson – “Nothing on earth can stop someone with the right mental attitude from achieving their goal.”

What is your best habit?

A positive mental attitude and strong work ethic.

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March 2020

The C-Suite

LAURA BRANDAO

American Financial Resources President & Partner What do you think is the biggest challenge currently facing the mortgage banking industry? The mortgage industry is ever-evolving. It doesn’t matter if you’re speaking 20 years ago, 10 years ago, five years ago, or if you’re looking into the future. One of the things we also love about our industry is that it’s not constant. It’s not the same mundane “every day you go to the factory and build a widget.” It’s not the same thing over and over again. So whatever year you ask that question, people will always say, “It’s challenging because of regulations,” or “It’s challenging because of technology companies coming in.” I really am not somebody who ever thinks about something that might be “looming” out there, because I think our industry is ever-evolving and part of the thrill of our industry is that you have to pay attention as a whole to some of the things that are coming down the pike and modify your business to keep up with those things.

What do you find most rewarding about your job? Being able to bring families home every day. Essentially, I feel that everyone in the mortgage business has been given an honor and a privilege of being able to make a powerful difference in the borrower's life. I do not ever look at it as a job or a career. I look at it as a privilege that I've been given in my life to be able to affect other peoples’ lives in a positive way by supporting my clients and supporting their families that have entrusted them to assist him with the purchase of a home or a refinance or whatever they are assisting them with. And therefore, when I get up in the morning, I am immediately excited about the opportunity of how many families am I going to affect in a positive way whether it's directly or indirectly and therefore my joy is in knowing that I have a part in bringing these families home.

What time do you get up?

I get up at four in the morning.

What’s the first thing you do in the morning?

I was at an MBA meeting a couple of weeks ago, and they asked that question. Some people raise their hand and said, “I am worried about some of these big technology companies. The Googles, the Amazons, the Zillows, coming into our space.” I actually don’t look at that as a negative at all because I look at it as, “If they’re going to continue to challenge us, and we’ve been here for all these years, to continue to figure out how we can possibly compete in the technological world and how to step up our game to continue to build out our relationships. “Bottom line, yes, you need to have technology to make it very efficient for borrowers and to be able to close timely and all of that, but at the end of the day our business is relational. Our business is a connection and a level of trust to be able to help that family.

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To be quite honest, I do grab my phone and see what happened. I go to sleep at 9 o’clock. I am extremely regimented and at 9 p.m., everything is quiet and I go to sleep. I am completely out and I instantly wake up at 4 o’clock. But it’s known that I will stay up on my emails and making sure that a client doesn’t need me or a team member doesn’t need me up until nine, so I do look at my phone to see what happened between 9 p.m. and the moment I wake up.

What is your mantra?

Live life to the fullest, and only focus on the positive.

March 2020

"Say yes every day."

What is on your desk? My phone, a bottle of water, a pen, and I always have a scrap piece of paper so that when I’m speaking to somebody on the phone, it’s very important to me then I catch the person’s name and the company they’re calling from. I don’t ever want to have to ask them to repeat their name or company. I want to write it down the second they say it so that I can pay attention to them.

What is the last thing you do at night before you go to bed? Turn off my phone. Everyone knows that after 9 p.m., I’m not reading emails and I’m not looking at text messages. I shut everything off.

What is your best habit?

I am very. very focused on feeding my brain with positive information. I think one of my best habits is that I am constantly reading, listening to positive podcasts, and feeding my brain with positive information. And I am regimented about it. A day doesn’t go by that I don’t try to learn something new, put myself out of my comfort zone, and expose myself to people that I may not have ever met before so that I can continue to be a good person and a happy, positive person. I have found that the core of that pushes through to everyone you touch in your personal life and your professional life.

The MORTGAGE BANKER Magazine

March 2020

Education

Education & Training Calendar Date

Course Name

Dates

Link

March 2020

Mar 2

Cap Rates: What Are They & What Are They Telling Us?

March 2

https://www.mba.org/store/events/webinar/cap-rateswhat-are-they-and-what-are-they-telling-us?check_for_ mini_site=Y

Mar 5

Introduction to Commercial Mortgage Backed Securities

March 5

https://www.mba.org/store/events/webinar/ introduction-to-commercial-mortgage-backed-securitiesx260440?check_for_mini_site=Y

Closing with Confidence Series Part I

March 5

https://www.mba.org/store/events/webinar/closing-withconfidence-series-part-i?check_for_mini_site=Y

Mar 9

School of Mortgage Servicing

March 9 - 19

https://www.mba.org/store/events/instructor-guidedonline-course/school-of-mortgage-servicing-march2020?check_for_mini_site=Y

Mar 10

Introduction To Mortgage Banking

March 10 - 24

https://www.mba.org/store/events/instructor-guidedonline-course/introduction-to-mortgage-bankingmarch-2020

Mar 11

Mortgage Accounting I: Drilling Into Mortgage Accounting

March 11

https://www.mba.org/store/events/webinar/mortgageaccounting-i-drilling-into-mortgage-accountingx261166?check_for_mini_site=Y

Mar 12

Closing with Confidence Series Part II

March 12

https://www.mba.org/store/events/webinar/closing-withconfidence-series-part-ii?check_for_mini_site=Y

Winning the Recruiting Sales Talent Wars

March 12

https://www.mba.org/store/events/webinar/winning-therecruiting-sales-talent-wars?check_for_mini_site=Y

Mar 16

School of Loan Origination

March 16 â&#x20AC;&#x201C; April 9

https://www.mba.org/store/events/instructor-guidedonline-course/school-of-loan-origination-march2020?check_for_mini_site=Y

Mar 18

Mortgage Accounting II: Loan Level Accounting

March 18

https://www.mba.org/store/events/webinar/mortgageaccounting-ii-loan-level-accounting-x261165?check_for_ mini_site=Y

Mar 25

Strategic Steps for Warehouse Lenders in Todayâ&#x20AC;&#x2122;s Market

March 25

https://www.mba.org/store/events/webinar/strategicsteps-for-warehouse-lenders-in-todays-market?check_for_ mini_site=Y

Conferences/Conventions

Instructor Guided Online Course (IGOL)

MBA Research Events

Classroom Course

Webinar

MISMO Events

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March 2020

Other

Education

2020

Calendar of Events

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March 2020

Calendar of Events MARCH

STATES

APRIL

MAY

ILLINOIS March 04, 2020 Mortgage Lending Industry Conference

COLORADO April 9, 2020 Mortgage Lenders Expo

NEW YORK March 11, 2020 6th Annual Strategic Real Estate & Lending Summit

KANSAS & MISSOURI April 22-24,2020 MBA Great River Conference https://www.greatrivermba.com/

http://www.wymla.com/services.html

CALIFORNIA March 23, 2020 Legislative Day

MARYLAND April 17, 2020 Installation Luncheon, Annual Meeting & Awards Ceremony 2020

MARYLAND Oxon Hill, May 11-13, 2020 Mid-Atlantic Regional Conference

IOWA March 24, 2020 IMA Spring Conference

NEW JERSEY April 19 - 23, 2020 2020 Regional Conference of MBAs

IOWA IMA Mortgage Boot Camp May 14 -15, 2020

CONNECTICUT March 24-25 2020 Loan Officers University

TENNESSEE April 22-24, 2020 2020 Great River MBA Conference

OKLAHOMA Oklahoma Conference May 21 - 22, 2020

https://imba.org/meetinginfo. php?id=9&ts=1576687922

https://cmla.com/civicrm/event/ info?id=311&reset=1

https://mbany.org/events/event_list.asp

https://www.cmba.com/legislative-day/

https://mmbba.org/meetinginfo.php

https://whova.com/web/imasp_202003/

http://www.cmba.org/?_ wga=2.188795171.986432858. 1576958208-1661659382.1572117843

http://mbanj.com/events

https://www.tnmba.org/events/eventscalendar/#!event/2020/4/22/2020-greatriver-mba-conference

WISCONSIN April 22-23, 2020 2020 Real Estate & Finance Conference http://www.wimba.org/Events

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March 2020

CALIFORNIA San Diego May 3-5, 2020 Mortgage Innovators Conference https://mortgageinnovators.com/

WYOMING 33rd Annual Conference May 6-8, 2020

https://marcmba.org/

https://iowama.org/events/

https://www.oklamba.com/index. php?option=com_jevents&task=icalrepeat.de tail&evid=4&Itemid=125&year=2020&month =05&day=20&title=2020-omba-conference&u id=f2f2af7a73a57f37eb3b01d68b9a1afa

Education

WHITE PAPERS & WEBINARS

REGULATORY COMPLIANCE • RISK MANAGEMENT • OPERATIONAL EXCELLENCE

READ, WATCH & LEARN ... ADVANCE YOUR KNOWLEDGE AND CAREER Click below for information and details on white papers, webinars and knowledge-based content

YOUR WHITE PAPER HERE

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March 2020

Data Download Top Origination Markets by Loan Volume Consolidated Metropolitan Statistical Area (CMSA/ Metropolitan Statistical Area (MSA)

% of Lock Volume

MOM Growth

Avg Loan Amount (S)

Avg Rate

Avg FICO

Avg LTV

Purchase

Reﬁ

Los Angeles-Long Beach-Anaheim, CA

5.93%

48.86%

490,689

3.878

727

30%

70%

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

4.81%

61.90%

416,697

3.671

732

42%

58%

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

4.11%

42.17%

402,615

3.820

727

44%

56%

Phoenix-Mesa-Scottsdale, AZ

3.74%

70.32%

281,012

3.817

725

42%

58%

Chicago-Naperville-Elgin, IL-IN-WI

3.27%

45.89%

283,028

3.916

729

45%

55%

Dallas-Fort Worth-Arlington, TX

3.00%

70.24%

408,841

3.702

717

32%

68%

Seattle-Tacoma-Bellevue, WA

3.00%

58.68%

424,578

3.789

733

32%

68%

Denver-Aurora-Lakewood, CO

2.96%

57.27%

358,889

3.772

730

30%

70%

Boston-Cambridge-Newton, MA-NH

2.91%

41.83%

288,291

3.866

737

54%

46%

Riverside-San Bernardino-Ontario, CA

2.38%

65.85%

591,239

3.777

713

20%

80%

Houston-The Woodlands-Sugar Land, TX

2.19%

41.13%

332,751

3.822

712

36%

64%

San Francisco-Oakland-Hayward, CA

2.11%

59.68%

499,843

3.692

745

29%

71%

San Diego-Carlsbad, CA

1.95%

49.67%

266,443

3.838

739

52%

48%

Atlanta-Sandy Springs-Roswell, GA

1.88%

29.25%

261,598

3.915

713

62%

38%

Miami-Fort Lauderdale-West Palm Beach, FL

1.76%

59.01%

286,674

3.741

714

41%

59%

Minneapolis-St. Paul-Bloomington, MN-WI

1.66%

33.04%

323,362

3.971

738

53%

47%

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

1.62%

46.80%

276,745

3.813

723

50%

Portland-Vancouver-Hillsboro, OR-WA

1.51%

45.92%

338,532

3.772

736

35%

65%

Austin-Round Rock, TX

1.43%

58.10%

352,324

3.771

737

31%

69%

Baltimore-Columbia-Towson, MD

1.37%

51.33%

323,376

3.777

724

45%

55%

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. More than $750 billion of transactions are processed each year across the Optimal Blue platform. For more information, please visit www.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.

The MORTGAGE BANKER Magazine

March 2020

•

Mortgage delinquencies fell by more than 5% in January, hitting their lowest level on record dating back to 2000

•

Despite the decline in delinquencies, foreclosure starts edged upward in January, but remain nearly 15% below last year’s levels

•

January’s 14% year-over-year decline is the strongest in more than 12 months, with the rate of improvement picking up noticeably in recent months

•

There are now fewer than 2 million homeowners past due on their mortgages or in active foreclosure, the fewest since March 2005

The number of loans in active foreclosure remained relatively flat for the month (+1,000 properties in foreclosure), and down 19,000 from the same time last year, leaving the national foreclosure rate unchanged

•

Though falling by 15% in January, prepayment activity remains 113% above last year’s levels

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 (NYSE:BKI) is a leading provider of integrated software, data and analytics solutions that facilitate and automate many of the business processes across the homeownership lifecycle.

B2B

BUSINESS SERVICES DIRECTORY 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.

Amanda Bowers VP of Marketing abowers@pfic.com

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.

Michael Whipple Vice President michael.whipple@ chenoafund.org

208.250.9132

Radian ensures the American dream through industry-leading mortgage insurance and a comprehensive suite of mortgage, risk, real estate, and title services. With the combined expertise of the entire Radian family—including Radian MI, Clayton, Green River Capital, Five Bridges Advisors, Independent Settlement Services, Red Bell Real Estate, LLC and Radian Title Services—we are a single trusted partner, delivering unparalleled value and efficiency across the mortgage and real estate spectrum. Visit www.radian.com to see how Radian is shaping the future of mortgage and real estate services.

Kristi Helmlinger Vice President Enterprise Sales, Mortgage and Real Estate Services

kristi.helmlinger@radian.com

215.231.1230

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.

Mitchel H. Kider Managing Partner

kider@thewbkfirm.com

202.557.3511

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March 2020

SPONSORS CORNER Many thanks to these sponsors for supporting our mission of bringing you a magazine dedicated to informing and educating mortgage banking professionals.

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March 2020

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Articles inside

FHA Training and Events

Mortgage Banking Lawyers

Reducing False Claims Act Risk in FHA Lending

From the Desk of the Om-Bobs-man

Compliance Alphabet Soups - HMDA

FHFA Proposes Updated Minimum Financial Eligibility Requirements for Fannie Mae and Freddie Mac Seller/Servicers

Security Risk: Fraudulent Closing Transfer Instructions Stealing Mortgage Pay-Offs