THE
BANKER
Covering the Entire Mortgage Lending Process and Everything In Between
MAGAZINE October 2020
The
TECH Issue
The Digital Difference is Being SMART pg. 8
Flexibility of Working Remotely Exposes Cybersecurity Threats pg. 12
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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October 2020
FEATURES
8 The Digital Difference is Being SMART BY PAUL ANSELMO
It’s no secret that digital processes are more efficient, less costly, safer, and more accurate than doing things manually. And, in recent months, with everyone trying to originate and close loans remotely and abide by social distancing protocols, the value of digitizing the mortgage industry has never been clearer.
12
Flexibility of Working Remotely Exposes Cybersecurity Threats
16
28
Community Banks and Fintechs: The Perfect Match
The COVID-19 pandemic remains a reality for many businesses. Employees continue working remotely and from home offices. It seems safe to say that this forced change may very well become permanent in many cases. Fortunately, the internet era and progress in technology have made it easier for many of us to carry out our regular duties from the comfort of our couch. However, this flexibility comes with its downsides, mainly by way of cybersecurity threats.
Banks, like many longstanding, conservative institutions, have rich data and valuable experience, which can contribute to a reluctance to adopt new processes and innovations. However, what they lack in innovation, they make up for in customer experience. By integrating with fintechs, these small lenders are able to hold their own in an industry dominated by national companies that cannot offer the same personalized experience as a community bank.
MARK BROWN
KOSTA LIGRIS The MORTGAGE BANKER Magazine
It’s the New Now, Not the New Normal As companies continue to operate through the fall and winter, they will need to monitor safety and legal issues while creating office plans that allow them to rebuild their company cultures. But the constant shifting of best practices based on new information means that businesses must remain adaptable. THOMAS A. BARSTOW
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Seeing the Much Bigger Global Technology Picture Watching the IT person troubleshoot my Wi-Fi issues made me even more aware of the possible threats our company data is exposed to daily. Plus, remote workers are now and will continue to be the new normal for our industry. This new normal highlights the need for a strong technology department and the allocation of resources to that department. FELECIA BOWERS
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October 2020
Special
SECTIONS
20
LEGAL TECHNOLOGY
20
Stepping Up the Fraud Prevention Game AN INTERVIEW WITH SAM BOBLEY
LOAN ORGINATION
24
44
Mortgage Banking Lawyers
MITCH KIDER
THE C-SUITE
Not Wasting Any More Time AN INTERVIEW WITH NATE JOHNSON
SECONDARY MARKETS
32
42
The Mortgage Counselor
The Next Step in the Journey Toward a More Efficient Automated Approach ANDREW BON SALLE
46
PROFILE: Christina Pham
48
PROFILE: Max Slyusarchuk
FOUNDER AND PRESIDENT JMAC LENDING
FOUNDER AND CEO A&D MORTGAGE
24
Monthly
DEPARTMENTS 6 From the Editor
COMPLIANCE
38 40
From the Desk of the Om-Bobs-man BOB NIEMI
50 MBA Education & Training Calendar
52 White Papers & Webinars 54 Data Download
Regulatory Corner
56 Business Services Directory 57 Sponsors Corner
The MORTGAGE BANKER Magazine
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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@twelve11media.com MANAGING EDITOR Brian Honea Brian@twelve11media.com SENIOR EDITOR Jill Emerson Jill@twelve11media.com OPERATIONS DIRECTOR Dawn Slayton Dawn@twelve11media.com ADVERTISING David Hoierman David@twelve11media.com PRODUCTION Henry Suchman Henry@twelve11media.com DIGITAL MEDIA Lucas Luna LLuna@twelve11media.com
FROM THE EDITOR Renowned science fiction author Arthur C. Clarke once said, “Any sufficiently advanced technology is equivalent to magic.” In the last seven months or so, we’ve seen plenty of magic performed as a large portion of the world as we know it went virtual and a substantial percentage of the workforce began working remotely. Nowadays, if any task can be performed without leaving the house, it often is. Which brings us to the topic of our October issue: the need for technology to operate during the pandemic. The massive shift from the real world to virtual left mortgage industry professionals scrambling to compensate, turning to technology to complete tasks remotely which were previously accomplished in person. In this issue, experts talk about some of the technology that has helped them adjust how they do business during this difficult time. Mark Brown of Advisor Armor discusses potential cybersecurity threats that have emerged from working remotely, Kosta Ligris of Stavvy talks about how community banks and fintechs are working together to improve both internal efficiency and customer experience, and Paul Anselmo of Evolve Mortgage Services tells us about the advantages of using SMART Docs, and much more. What technology have you employed to make things easier or to help your business make it through the pandemic? We want to hear about your experiences. We are always listening. You can always drop us a line via the email address below.
COLUMNISTS & CONTRIBUTING AUTHORS Paul Anselmo Thomas A. Barstow Andrew Bon Salle Felecia Bowers
Mark Brown Mitch Kider Kosta Ligris Bob Niemi
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.
October 2020
AUTHORS
Paul Anselmo
Thomas A. Barstow
Andrew Bon Salle
Felecia Bowers
Paul Anselmo is the CEO and founder of Evolve Mortgage Services, a top provider of outsourced mortgage solutions. He has more than 30 years of experience in the banking and mortgage industries. In 2019, Paul was honored as a “Lending Luminary� by the PROGRESS in Lending Association. He can be reached at paul.anselmo@ evolvemortgageservices. com.
Thomas A. Barstow is the senior editor for Reverse Mortgage Magazine. Barstow is a licensed loan originator (NMLS #1590611) for Virginia-based City Lending, Inc.. He has had a 34-year career in journalism that has included being a writer and editor in Maryland, North Carolina, Pennsylvania, and New York. He currently teaches journalism at Gettysburg College and writes for various business publications.
Andrew Bon Salle is executive vice president of Single-Family Business. Reporting to the president, he is responsible for all aspects of the SingleFamily Business, including engagement with customers, managing the performance of its credit portfolio, and overseeing all capital markets activities. Bon Salle also led the company's efforts to integrate with the Common Securitization Platform.
Felecia Bowers has spent more than 40 years as a bank examiner and chief compliance officer, working specifically with mortgage bankers for over 35 years. Her experience is complemented by the fact that while she was the CCO, she ran the secondary/ capital markets department, quality control, and HR, and she is a DE Underwriter.
Mark Brown
Kosta Ligris
Mark Brown is president of Advisor Armor, a leading business and regulatory cybersecurity complianceconsulting company. Advisor Armor was founded in 2014 with headquarters in Scottsdale, Arizona, and he provides interpretive guidance and the tools necessary to meet federal and state information and privacy security regulations. Mark can be reached at mbrown@advisorarmor.com.
Kosta Ligris is co-founder of Stavvy, the eClosing platform. Kosta is a lifelong entrepreneur and the founder of the Ligris Companies (Ligris & ACES Title), a collection of professional services, real estate, and consulting firms with offices in New England, New York, and Florida. He is an MIT Sloan MBA, an active angel investor, and Entrepreneur in Residence at the Martin Trust Center for MIT Entrepreneurship.
The MORTGAGE BANKER Magazine
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October 2020
Technology
The Digital Difference is Being
SMART By Paul Anselmo, Evolve Mortgage Services
I
ELIMINATING ‘STARE AND COMPARE’ AND ‘RECOGNIZE AND EXTRACT’
t’s no secret that digital processes are more efficient, less costly, safer, and more accurate than doing things manually. And, in recent months, with everyone trying to originate and close loans remotely and abide by social distancing protocols, the value of digitizing the mortgage industry has never been clearer. But while most home lenders, title companies, and closing providers have migrated from preparing paper documents to digital PDFs, many are nowhere near realizing the full benefits that digital processes provide. The key to unlocking the industry’s digital future is to transition from PDFs to SMART Docs and to start by understanding the difference between the two. The MORTGAGE BANKER Magazine
To be sure, it’s much easier to manage documents stored electronically as PDFs than it is to manage paper files. Yet the benefits of PDFs begin and end there. PDFs may save physical space, but processors, underwriters, auditors, and increasingly machines, still have to examine them to make any sense of them. PDFs are also incredibly time-consuming to handle for signing. In order to be signed by borrowers, they must first be tagged somehow by a loan processor, closing agent, or a machine. This process leaves the potential for errors or missing signature or initial points. Additionally, 8
October 2020
PDFs cannot automatically be read and verified with 100 percent accuracy; they have to be visually inspected by humans or run through some AI platform using optical character recognition (OCR) or machine vision. This also creates the potential for oversight and mistakes, which, again, must be reviewed by humans, with no guarantee of 100 percent accuracy in either case. SMART Docs are completely different. While everyone has heard of them, few can remember what SMART actually stands for: Securable, Manageable, Archivable, Retrievable and Transferable. It’s these traits that make SMART Docs so valuable and guarantee that whatever information the borrower sees, is the exact same The MORTGAGE BANKER Magazine
information lenders will use in downstream processes. Unlike PDFs, SMART Docs contain an almost unlimited amount of data that can be instantly read by computer systems without requiring OCR tools. This enables all parties involved in the transaction to identify and extract the data they need without human intervention with absolute, unequivocal accuracy. And they include a secure record of everything that has happened to the document: when it was created and modified and where it has been sent, etc. SMART Docs are also vital for remote online notarizations (RONs), which have never been more valuable than they are today. When used in 9
October 2020
Technology accordance with state requirements for RONs, borrowers can sign their closing documents from the comfort and safety of their home under the virtual presence of a certified notary. Nearly half of all U.S. states had made RONs legal before the pandemic began, and more than a dozen states have since joined them. Let’s also remember that electronic recording capabilities at the county levels have increased dramatically to accompany RON adoption. This potential for a truly end-to-end digital experience wouldn’t be possible without SMART Docs. But in order to realize this potential, it can be challenging to know where to begin.
SMART Docs are essential because they enable lenders to choose between XML or PDF formats depending on the requirements of a specific investor or trading partner. And a full library of SMART Docs enables electronic due diligence of an entire loan closing file. When we couple a full library of Category 1 SMART Docs with the advances made in the other half of a loan file, such as the credit side, appraisal data, income and employment data, and assets where available, we are closer and closer to truly digital loan files as opposed to “digital image” loan files. Closing documentation and, for that matter, disclosure documentation can all be SMART. Think of it this way: Why would anyone take digital information from a source platform and lose the opportunity to remain digital only to produce more digital images that require “stare and compare” or machine/human reading and extraction? With SMART Docs, the data is the loan documentation, only it comes with a view for the consumer so it is familiar to them. In fact, the borrower’s view of a SMART Doc and their view of a digital image of that document look exactly the same. The difference is that your closing docs are SMART after closing. Thanks to the pandemic, SMART Docs have never been more popular than they are today. According to a Fitch Ratings report, the volume of eNotes registered on the MERS eRegistry is up 267 percent so far this year compared to 2019. Yet, even with a pandemic driving the increase in SMART Docs, overall eMortgage adoption remains low, as the total percentage of agency loans fully utilizing eMortgage technology is only 4 percent. In a post-pandemic market, however, adopting SMART Docs will be even more beneficial for lenders and servicers, simply because they provide an unequaled level of efficiency, accuracy, and security. In other words, SMART Docs are smart business. MBM
HOW TO GET ‘SMART’ When it comes to taking advantage of SMART Docs, most lenders need the help of a trusted eMortgage partner. Two places to find them are Fannie Mae and Freddie Mac, both of which maintain a list of eMortgage vendors that have been approved for submitting electronic files to the GSEs. All the vendors on these lists have eNote delivery systems that have been tested and proven capable of meeting the GSEs’ requirements. At the same time, however, neither Fannie nor Freddie endorse eMortgage vendors, so it’s up to lenders to perform their own due diligence when choosing a partner. Unfortunately, most venders, including those that are on the GSEs’ lists, only create eNotes in SMART Doc format, not other types of documents. We all recognize the importance of the note in a mortgage transaction, but what about the other documents that support the transaction? While the agencies only care about the note, others in the transaction such as originators, sellers/securitizers, and servicers must care about and are responsible for the accuracy of the entire loan documentation. Getting the most value out of SMART Docs requires a full library of MISMO Category 1 SMART Docs that includes the most common loan documents lenders use. Category 1
The MORTGAGE BANKER Magazine
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October 2020
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OF EXPERIENCE
Shawna Adams Managing Partner
WHERE YOUR BUSINESS IS THE FOCUS OF OUR BUSINESS
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A&S Elite has assembled a team of top talent with unprecedented experience in mortgage lending and technology. Our team has sat in the seats of LO’s, Processors, Underwriters, Closers, QC, and Post-closers. Enabling our team to see your business through both the operational and technical lenses. Dennece Bickley Director of Consulting Services
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Technology
FLEXIBILITY OF WORKING REMOTELY EXPOSES CYBERSECURITY THREATS
By Mark Brown, Advisor Armor
T
he COVID-19 pandemic remains a reality for many businesses. Employees continue working remotely and from home offices. It seems safe to say that this forced change may very well become permanent in many cases. Fortunately, the internet era and progress in technology has made it easier to carry out regular duties from the comfort of the couch. However, this flexibility comes with its downsides, mainly by way of cybersecurity threats. Not only do remote workers put their own privacy at risk, working from home could result in breaching company security as well. In this post we will share tips to work from home and remotely with more security.
The MORTGAGE BANKER Magazine
Before delving into the security tips let’s take a look at a few of the threats. • Unsecured WiFi networks: Working from home or public WiFi are prime spots for malicious parties to spy on internet traffic and collect confidential information. • Using personal devices and networks: Many must use personal devices and home networks which often lack the needed tools to manage and monitor privacy and security settings. • Scams targeting remote workers: Malicious campaigns targeting remote workers have accelerated. Thankfully, armed with the right knowledge and tools, many of these threats can be avoided.
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Antivirus Software - Although a firewall can help, it’s inevitable that threats get through. A good antivirus software can act as the next line of defense by detecting and blocking known malware. Even if malware does manage to find its way onto your device, an antivirus may be able to detect, and in some cases, remove it. Many operating systems now include strong antivirus software or they may be purchased separately.
CYBERSECURITY TIPS FOR WORKING REMOTELY Note that before taking measures to protect online security check to see if any protocols from employers have been put in place. In light of the COVID-19 crisis, many companies hastily added work-from-home plans.
1. CREATE STRONG PASSWORDS It is important as ever to ensure that all accounts are protected with strong passwords. Unfortunately, many people still use the same password across multiple accounts. This means that all it takes is one compromised password for a criminal to take over your accounts. These bad actors take leaked usernames and passwords and attempt to log on to other online accounts, a tactic called credential stuffing. Passwords must be unique and not easy to decode. A random mix of letters and symbols, along with uppercase and lowercase letters, make the strongest passwords. To further enhance security, use two-step verification, fingerprint, or facial recognition when available. Clearly, it’s difficult to remember all these passwords, which is why password managers are such popular tools these days.
Software Updates - Updates to device software and other applications can be a source of annoyance, but they really are important. Updates often include patches for security vulnerabilities that have been uncovered since the last iteration of the software release. In many cases updates can be set to run automatically, often while the user is away or even overnight. Remote Access - Remote access to devices should be allowed only when absolutely necessary and then immediately disabled. Locked Devices - If working in a public space, or a shared workspace, then it’s important to keep devices locked and secure. Password-locking devices will usually encrypt its contents until passwords are entered.
3. CONFIGURE ROUTER SETTINGS
Routers come with default settings and passwords. Most users are unaware that router settings can be configured. To make the remote connections safer router passwords should be changed. This way, no outsiders can access with malicious intent. Some routers are not protected with a password, which shows they are not encrypted. In this case, routers must be upgraded to WPA2 or WPA3, to make sure that data entering and leaving devices is not accessible to cybercriminals.
2. SECURE DEVICES The most important issue when working from home is the security of the devices used. Testing and monitoring the security of devices minimizes the chances of cyberattacks. Key aspects to test for device security include: Firewalls -Firewalls act as a first line of defense to prevent threats from entering systems. They create a barrier between devices and the internet by closing ports to communication. This can help prevent malicious programs from entering and can stop data leaking from devices. A device’s operating system will typically have a built-in firewall. In addition, hardware firewalls are built into many routers. Users must make sure these firewalls are enabled.
The MORTGAGE BANKER Magazine
4. PROTECT YOUR NETWORK
Usually, companies hire software agencies to set up a well-protected network within their organizations. However, most local Wi-Fi suppliers do not provide network security, and the data moving in and out of the network is easily
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Technology
accessible to predators and spies. In this case, it is recommended to use a VPN, which provides an encrypted tunnel for all online transactions and even disguises identity and location. Note that using a VPN can slow down internet speeds. If performing high-bandwidth tasks such as holding video conference calls, a VPN known for its speed and reliability will be necessary.
Phishing emails, as well as voicemails (vishing) and text messages (smishing) are used by cybercriminals to “phish” for information. This information is usually used in further schemes such as spear phishing campaigns (targeted phishing attacks), credit card fraud, and/or account takeover fraud. With the rise in the number of people working from home due to the coronavirus outbreak there are plenty of cybercriminals looking to cash in on this weakness. To spot a phishing email, users should always check the sender’s email address for spelling errors and look for poor grammar in the subject line and email body. Avoid hovering over links to see the URL and avoid clicking links or attachments unless the sender is trusted 100 percent. If there is any doubt, senders should be contacted using a phone number or email address that can be found somewhere other than in the suspicious email. If a link is clicked and a user ends up on a legitimate-looking site, the credibility should be further checked before any information is entered. Common signs of a phishing site include lack of an HTTPS padlock symbol (although phishing sites increasingly have SSL certificates), misspelled domain names, poor spelling and grammar, lack of an “about” page, and/or missing contact information. The coronavirus mandated a move to distributed and remote work. Technology has allowed productivity to continue. These very same advanced tools, however, present new opportunities for criminals to breach systems and data. The key is to shine a light on these vulnerabilities and provide solutions to answer and avoid them. MBM
5. BACKUP DATA Data can be lost in a number of ways including human error, physical damage to hardware, or a cyberattack. Ransomware and other types of malware can wipe out entire systems without users being aware anything has occurred. Clearly, there are plenty of reasons to back up data. While hardware backups are still an option, one of the most convenient and costeffective ways to store data is in the Cloud. Cloud backup services come with a wealth of options enabling users to customize backup schedules and storage options.
6. USE ENCRYPTED TOOLS Not all data sharing tools and software provide end-to-end encryption. This means shared files and communication on these platforms are not secure and can be accessed by others. To solve this issue only tools that are encrypted and maximize online data security should be utilized.
7. AWARENESS AND EDUCATION Human error is the major cause of data breaches. There are many forms of human error, the mishandling of software, clicking on malicious links, leaking of passwords, etc. To minimize these, it is imperative to train employees specific to cybersecurity.
The MORTGAGE BANKER Magazine
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October 2020
Technology
Community Banks and Fintechs: The Perfect Match
Working together to boost internal efficiency and improve the customer experience
By Kosta Ligris, Stavvy Now more than ever, community banks need to focus on what the future of digital transformation will look like for their customers. Banking transactions have become increasingly virtual, effectively shifting customers’ expectations and needs. While large institutions offer in-house technology, in order to stay competitive, small banks need to focus on building partnerships with fintech startups to solve some of the most fragmented aspects of the customer experience. Banks, like many longstanding, conservative institutions, have rich data and valuable experience, which can contribute to a reluctance to adopt new processes and innovations. However, The MORTGAGE BANKER Magazine
what they lack in innovation, they make up for in customer experience. By integrating with fintechs, these small lenders are able to hold their own in an industry dominated by national companies that cannot offer the same personalized experience as a community bank. Loan applications are notoriously painful and lengthy experiences. Customers are often 16
October 2020
asked to provide information that the bank may already have on file. Technology has penetrated nearly every sphere of our everyday lives, yet this archaic and onerous process looks the same today as it did decades ago. The banking industry needs to look at solutions that create a more efficient, secure, and transparent experience for their customers. In today’s “Always Open” The MORTGAGE BANKER Magazine
economy, internet-savvy consumers are more educated than ever on available options and processes and rely on resources that are accessible online 24/7. Community banks stand in a unique position to take their local market expertise and loyal customer following to partner with fintechs in developing solutions that recreate the customer experience. Fintech startups are able to move fast 17
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Technology
and solve fragmented processes, making a bank-fintech partnership the fastest and most scalable way for banks to access cutting-edge technology and innovation. A fintech’s product and engineering talent might not necessarily have deep knowledge of banking procedures; however, this outsider’s perspective can provide a fresh approach that leads to a modern user experience. But fintechs cannot rise to this challenge alone: they need community banks to first embrace innovation and partnership. Innovation in financial services requires considerable expertise in navigating regulatory and compliance requirements. Banks understand these regulatory constraints and have the knowledge to plan for audits and oversight. One of the keys to successfully integrating with a fintech partner is articulating this framework and the banks’ needs beyond innovating simply for the purpose of meeting regulatory requirements. Technology has the power to create secure connections, process complex data sets, and present real-time alerts and analytics to banks. These functions can mitigate risk and enable a more dynamic risk management framework as opposed to the static framework to which we have become accustomed. Fintechs are able to connect existing software together in simple, user-centric platforms by building and leveraging other innovative platforms using application programming interfaces (APIs) or software development kits (SDKs). Security is a critical component of any project in financial services, so having security experts as part of the team is invaluable. Banks need to have internal resources available that can assess security risks: these checks and balances are essential to developing and deploying new technology. The stakes are too high to rely solely on your fintech partner. If a community bank doesn't have a security expert on its bench, they should consider retaining an independent consultant to review the architecture, data flow,
The MORTGAGE BANKER Magazine
and data storage. Fintechs have reputational risk associated with security risk and data storage, but when it comes to regulatory exposure and risk management, this is a step that can never be left to chance. Technology and software have completely changed the world. Life would have looked drastically different during this global pandemic without some of the most powerful and iconic technology companies empowering commerce, web meetings, communications, supply chain, financial services, and more. Despite this forward motion, lending, one of the dominant forces in the economy, remains relatively stagnant: the customer experience may have online applications, but the virtual processes are just as tedious as the paper applications used 30 years ago. Banking executives know that embracing digital transformation is not only timely, but necessary. The industry is poised for innovation; community banks just need to find the right fintech partners. No virtual platform can replicate the human touch that has made these banks irreplaceable for centuries. Still, in today’s digital world, our lives revolve around the use of mobile devices; we depend on instant access to tools and technology that are simple and intuitive. Community banks have the power to shape their future and redefine the community banking experience. Customers should not have to choose between the convenience and power of best-in-class technology traditionally only deployed by large international banks and personal relationships with their community bank. By partnering with innovators, community banks have the opportunity to redefine the customer experience and strike the perfect balance between technology and personalization, creating a dynamic that will keep them competitive far into the future. MBM
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Question #3 Who will most benefit from using ActiveProspect’s services? ActiveProspect’s suite of SaaS products currently serve businesses in a wide range of industries that include Home Services, Insurance, Education, as well as direct to consumer markets. Within Financial Services, consentbased marketing should be a top priority for any lender, mortgage banker, bank, broker or credit union who currently has a call center or consumer direct platform. The prevalence of call centers and auto-dialers in the financial services space has made the industry heavily regulated to the TCPA, even a regular target of the FTC. Additionally, lenders, banks, and credit unions frequently deal with the kinds of high lead and call volumes that could most benefit from the added efficiency of identifying and prioritizing the warmest leads. The benefits of ActiveProspect are farreaching because our products are applicable to so many industries and can service a variety of use cases. And we impact the end users as well, improving the ecosystem for businesses and consumers alike. Any lender interested in scaling its operation safely while improving marketing ROI should set up a consultative call with ActiveProspect.
Technology
STEPPING UP THE FRAUD PREVENTION GAME An interview with Sam Bobley, CEO of Ocrolus By Brian Honea
The COVID-19 pandemic has resulted in a substantial increase in the amount of online commerce for the mortgage industry in the last few months, which increases the likelihood of fraud. Recently, the National Credit Union Association recently issued a risk alert as fraudsters look to take advantage of newly implemented or expanded government programs for COVID-19 relief, such as the CARES Act. The MORTGAGE BANKER Magazine
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October 2020
Lenders’ legacy fraud detection models can often catch routine scams, but they may not be enough to prevent many scammers from slipping through the cracks as hundreds of thousands of borrowers are seeking COVID-19 relief. With scammers increasing their efforts to circumvent fraud detection models, lenders must step up their game by advancing their current fraud prevention processes. Sam Bobley, CEO of New Yorkbased fintech Ocrolus, recently spoke with The MORTGAGE BANKER Magazine about how lenders can reduce the likelihood of fraud through upgraded processes that catch fraud quicker and more seamlessly.
be done by implementing APIs that unearth synthetic identities and automatically complete extensive Know Your Customer verifications. Once a borrower’s identity has been confirmed as legitimate, approving mortgage applications boils down to an evaluation of the customer's credit, income, and assets (assuming the subject property appraises). The primary points of vulnerability are income and assets; meaning that a borrower has the ability to misrepresent their income and assets by altering financial documents or even creating completely fabricated documents from non-existent employers. To most effectively combat malicious behavior, identity verification should also be performed on employers. Tools like Middesk enable lenders to seamlessly perform Know Your Business checks to ensure the alleged employer is indeed a real company. To avoid identity fraud, it is essential to perform a deep check for synthetic identity with clustering technology via participation in ‘fraud defense networks’ that enable the industry to collectively fight against bad actors. File tampering technology can be used to discover image fraud—documents that contain information that was added or edited after the document was created. Ocrolus has taken this one step further by also helping lenders programmatically detect data fraud, which is inconsistencies in key data elements that signal foul play. For example, reconciling bank transactions against account balances and crossreferencing data elements across multiple sources can help mortgage lenders determine where greater scrutiny is required. Image fraud helps lenders automatically recognize altered and fabricated documents and identify suspicious activity, including incomplete data sets, missing pages, invalid dates and amounts, abnormal fonts and
MBM: In what ways are fraudsters known to be taking advantage of relief programs such as the CARES Act? Sam Bobley: To date, the PPP funding program has encountered every type of financial fraud imaginable: forged or manipulated documents, creation of fake companies, identity theft, and simply misuse of funds outside of business expenses. Fraud detection and prevention associated with PPP underwriting have involved reviewing documentation and creating an audit trail for post-loan investigation. MBM: In what ways have mortgage lenders and servicers stepped up their fraud detection to prevent this? Sam Bobley: Given the profound economic uncertainty, lenders need to be more diligent than ever while reviewing applications. In our experience at Ocrolus, there are three key areas where mortgage lenders have adopted innovative technologies to prevent fraud: image, data, and identity fraud. To combat borrower fraud, mortgage bankers need to deploy sophisticated technology that triangulates suspicious behavior. Firstly, the mortgage lender needs to defend against identity fraud, which can
The MORTGAGE BANKER Magazine
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October 2020
Technology logos, and irregular formats. Using data sets is also essential for the foundation of strong fraud defense. It can help lenders in analyzing transactions to recognize schemes intended to game the system.
of ever-evolving thread of altered loan documentation. MBM: Is there an example of when the implementation of fraud prevention resulted in catching a fraudster who was prosecuted?
MBM: What method do fraudsters use that is the most difficult to detect or perhaps the one people have to be most on the lookout for?
Sam Bobley: In late September, a story broke on mortgage fraud perpetrated by a dozen individuals representing over 100 mortgages over four years. The alleged fraudsters were new home builder property agents; with their understanding of the loan application process, the agents guided homebuyers with the creation of falsified bank statements and pay stubs.
Sam Bobley: Fraudsters have developed a variety of methods to alter loan documents. This can range from altering specific data points to creating entirely counterfeit paper trails, which are sometimes even tied to entirely counterfeit identities. Fraudsters operate with a mentality of rapid iteration in an attempt to stay one step ahead of the defense. It is critical for lenders to invest in technology to fight against the threat
This insurance protects the originator from losses stemming from loans contractually required to be repurchases by the investor. The cost is typically passed through and is less than the cost of the loss reserves.
Brian Honea is the managing editor of The MORTGAGE BANKER Magazine.
Problem Mortgage originators are increasingly at risk of financial losses resulting from application fraud such as: • • • • •
Income misrepresentation Occupancy misrepresentation Property value misrepresentation Undisclosed real estate debt Transactional (e.g. straw buyers)
Benefits Fully Customizable Protects originator from putbacks Increases loan value in the secondary market Pass-through cost Both QM and non-QM covered
Kris Anderson 812-887-0443
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October 2020
Ai-driven, volume busting, 3-second title decisions.
WE’VE GOT THIS. Meet REalSearch. It’s a beast of a title and property underwriting decisioning engine that applies AI to a robust set of databases to deliver fast look decisions in 3 seconds flat. If a file needs curative, REalSearch goes even further to eliminate tedious, time-consuming legwork. For example, it will tell you which John Smith in a property’s geography is the right John Smith. REalSearch is the latest brainchild of Agents National Title Insurance Company, a next generation title underwriter that’s part of the Incenter family. It easily integrates at any point in the origination process. All you have to do is ask your title agent. We’ll take it from there.
agentstitle.com
Loan Origination
Not Wasting Any More Time Using Smart Process Re-Engineering to Slash Inefficiency An interview with Nate Johnson, SLK Global Solutions By Brian Honea
A major part of inefficiency in mortgage operations typically involves wasted time and effort in many of the activities that lead up to the underwriting decision. Among the culprits are long cycle times between application receipt and starting processing, delays in notifying customers about additional document requirements, multiple file touches by underwriters and processors prior to the final decision, and inaccurate quality checks. Nate Johnson, SVP Mortgage Business Head with Dallas-based SLK Global Solutions, recently discussed smart process re-engineering with The MORTGAGE BANKER Magazine. The MORTGAGE BANKER Magazine
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MBM: How does smart process re-engineering work?
MBM: How does automating communication work to improve efficiency?
Nate Johnson: In retail lending, we start at the pre-underwriting support process. We will first engage with an originator and assess what is done manually and determine how far along they are in their digital transformation. This can range from paper files that are being done for portfolio loans to a fully digital loan fulfillment process. The key to re-engineering a process with as many moving parts as a mortgage workflow is to uncover what is a symptom and what is the disease. This will allow us to pinpoint where the inefficiencies are and where things bottleneck. Then we ask, how complete are the files you are receiving? Where along the workflow are you seeing stagnation? What can we automate, and will it bring any lift? What processes do we leave in-house, and what can we outsource? That can be everything from third-party ordering, fraud guard, appraisals to title, verifications, insurance, etc. Streamlining and automating checklists can provide an originator with a significant uplift. I was on a call yesterday with market leaders and quality control experts from all around the U.S. From lender to lender, and from correspondent buyer to correspondent buyer, checklists are not standardized. Everyone has their own checklist. So, in order to truly automate QC, you've got to build each client’s checklist individually. And let’s not forget that you've got to build it for each type of loan your client offers as well. Once these checklists are done, tracking compliance and rules changes for our clients is one of the keys to our solutions. In addition to successfully automating checklists, we have found that automating communication (emails, push notifications and texts to processors, underwriters, borrowers and loan officers) is important to providing a high level of clarity while reducing many of the manual correspondence originators traditionally had to fulfill.
Nate Johnson: I was an originator early in my career, back in the late 90’s, and owned a broker firm in the Houston area. Many of the borrower complaints involved not getting enough communication with their loan officer who, along with their loan assistant, are generally their single points of contact. Many originators today are finding that this continues to be the case. Being able to automate emails for every stipulation that is cleared or remains on a loan, as well as updates on the timetable for completion, push notifications, and dashboards that borrowers are able to access on their own, gives the borrower clarity throughout the loan process. Not only does this increase the customer experience, it also increases your employees' experience all well. Automating these processes will create efficiencies by taking a lot off their plates.
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MBM: Can you give an example of how everything goes when perfect, everything's automated, and it's just the most efficient thing ever? And then the flip side of that when it’s not efficient and there's not that communication? Nate Johnson: Absolutely. Suppose you have implemented some automation and you have re-engineered the pre-underwriting portion of the life cycle of the loan. Then, let’s say, you ‘ve got an approved borrower for a purchase loan who has given you two paycheck stubs, their last two years’ tax returns, the last two years’ W2s, and the last three months of bank statements. The borrower has been given a preapproval letter from the originator and submits offers on several properties, but is unable to get an accepted contract for maybe three or four weeks. The borrower would be required to update some of the information that they have already provided. If you are already anticipating this and doing it manually, you would have a loan assistant or processor communicating with
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Loan Origination the borrower that this information is needed, which creates room for inefficiency. Performing these tasks manually can be cumbersome in a high-volume environment. On the other hand, if you’ve automated some of this communication, it reduces the risk that these updated materials would be missed. The system would generate the follow-up emails that you're sending to the borrower. You can also have the system recognize that the date of the last paycheck stub or bank statement is no longer valid and needs to be updated. Once you know that a certain amount of time has gone by where the oldest bank statement and the oldest bank paycheck information has expired and you can't use them anymore, it will automatically send an email to the loan officer’s assistant, the loan officer, and to the customer requesting that they send in their most recent paycheck stub or bank
The MORTGAGE BANKER Magazine
statement. Without these checks in place, the file could go to the underwriter's desk before it’s complete. This would create an underwriting ‘touch,’ when there is a stipulation where the borrower would have to provide the updated income information. Now, that unnecessary ‘touch’ does a lot of things. That one paycheck stub can almost ensure that the underwriter has to touch that file again. It could also be missed and create a stipulation prior to closing, during quality checks, or even when loans are being purchased. Keep in mind that efficiency, especially in underwriting, is primarily based on how many touches an underwriter has on a particular file. And those metrics, especially for large originators, are watched and analyzed closely. It can affect the grading of the underwriter or the processing group. It can also cause undesired friction
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between the underwriter, the loan officer, and the loan officer’s assistant. The more the underwriter touches the file, the less efficient the process. MBM: How big of a difference does it make in your bottom line? Nate Johnson: One of our key questions we ask our clients—and I'm sure other third-party service companies like us ask this, too—is, how do you decrease that amount of touches that an underwriter has? A winning value proposition consists of proven ways to do this for your clients without significant disruption. Underwriters are one of your most important and expensive resources. If you can increase the amount of loans they're able to review by just one a day, it will make a huge difference in your bottom line. I can tell you that for one of our clients, we brought down their underwriting touches from six to two, which made their underwriters three times more efficient than they were before they signed on with us. If you're able to automate a lot of the communication with the client and their borrowers, if you're able to automate checklists and auditing of files, wherever that is within the workflow and the life cycle of the loan, and if you pair that with best practices, for processing and fulfillment from pre-underwriting to closing, you're going to be much more efficient than you were before, and ultimately more competitive. I have been asked, “how do I produce a loan for the least amount of money?” The cost of originating alone has skyrocketed in the past decade due to increased resource costs, compliance, quality control measures, and overhead. Ultimately, to decrease the amount of money you spend on a loan, automation and process improvement is essential to making the originator more profitable. Brian Honea is the managing editor of The MORTGAGE BANKER Magazine. The MORTGAGE BANKER Magazine
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Mortgage Operations
It’s the New NOW, Not the New
NORMAL By Thomas A. Barstow, NRMLA
A
s companies continue to operate through the fall and winter, they will need to monitor safety and legal issues while creating office plans that allow them to rebuild their company cultures. But the constant shifting of best practices based on new information means that businesses must remain adaptable. “As we know, we are in pretty uncharted territory,” says Shari G. Kleiner, an employment law attorney with Kleiner Feldman Plotkin PLLC in Washington, D.C. As businesses started to re-open The MORTGAGE BANKER Magazine
in the summer, her goal was to help clients remove as many landmines as possible because employment law was not built to handle a pandemic. “This is a transition. This is not the new normal. This is not forever.” The challenges create the “new now, not the new normal,” because this situation is different from the status quo, which will not be clear for a while, adds Kleiner, whose law practice focuses on associations and nonprofits, as well as startups. “It’s probably, and we hope, very different from 28
October 2020
what it is going to be a year from now, and we hope what is going to be around a year from now is going to look a lot more like what it used to be,” Kleiner explains. “But let's just say at least until the end of this calendar year, and perhaps longer, we are in the new now, and this is the transition period.” States began to slowly emerge from the pandemic in the late spring, allowing businesses to re-open as long as they were following guidelines to protect the public and their employees. But by late June and early July, flare-ups in states such as Texas, Arizona, and Florida led some governors to pull back, including closing bars to patrons in Texas. Such uncertainty has meant that businesses can only do their best to follow safety protocols and to stay informed about shifts in best practices, Kleiner and others note. The oft-cited example is how the Centers for Disease Control and Prevention suggested in the early stages of the pandemic that face coverings were not needed to slow the spread of the virus, only to reverse course and strongly recommend that coverings be used when social distancing of six feet or more could not be maintained. Those situations leave businesses without a “black letter law” to follow, but that they should be okay if they act reasonably, Kleiner says. That means following the CDC guidelines, while making sure that someone is put in charge of monitoring developments and adjusting for changes to current employment law. She points out that, in the U.S., people can sue anyone for just about anything, so liability always is a concern. But, in general, liability only would be an issue if there is unreasonable or egregious behavior. Nationally, business groups, such as the National Federation of Independent Businesses (NFIB) have been seeking liability protections in Congress or on the state level, noting that surveys showed that 70 percent of small business owners were concerned about increases in claims as the states started to reopen. “It’s imperative that we establish protections from the threat of lawsuits that exploit the already damaging effects of COVID-19,” says Karen Harned, executive director of the NFIB Small Business Legal Center. The MORTGAGE BANKER Magazine
In the meantime, having solid policies in place should avoid nuisance suits, Kleiner says. A danger is having policies you say will be in place but then don’t follow through with them, such as telling workers you will require them to wear masks and then not enforcing the rule. “Be careful with that,” Kleiner says. “It only works if you are as good as what you say you are going to do.” Telecommuting was one of the first issues with which companies wrestled. Not all jobs are suited for remote work, so the goal was to develop guidance on how telecommuting would be assigned and then overlaying the issues from COVID-19. Companies have the right to assess how people did working from home during the crisis, explaining to them that their inability to perform all of the essential elements of their job remotely supports the requirement that they must return to the job site, Kleiner says. The other way for companies to protect themselves is to do “homework,” she says. Somebody, either inside the company or an outside expert, needs to know the details and stay on top of them as the crisis continues. Imagine being sued, Kleiner says. And then imagine the defense. If you followed the CDC guidelines and put out policies on the guidelines that were distributed to the people who needed them, and then made sure that you followed up with compliance in the workplace, you can demonstrate that you acted reasonably. The “tools” that already exist and that must be completely understood include current regulations in employment law, such as the Americans with Disabilities Act and the Family Medical and Leave Act. Congress has temporarily enhanced some laws to account for COVID-19, so that means that companies must have experts in place who understand the details of the existing laws, as well as the changes, Kleiner notes. For example, people 40 and older already are protected from age discrimination for existing laws. With COVID-19 being particularly devastating to people 65 and older, companies need to be sensitive to how they handle issues with people in the older age groups. The ADA already had language in place about making accommodations for people with disabilities, so employers who were well-versed in 29
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Mortgage Operations such practices will be in the best position to make reasonable decisions for workers who now request accommodations due to COVID-19. “Once you know that someone has a reason and is covered by ADA or in the framework of COVID, you should talk to the worker about the essentials of the job and whether they can do them, and if they can do them at home or they must be done at work,” Kleiner says. Because adjustments will need to be made throughout the pandemic this fall and winter and until a vaccine is found, companies will need to re-evaluate policies as they go along, the experts say. The consensus among health officials is that a resurgence of the virus is expected in the colder months. Kleiner and Rachel Platt, founder of the human resources company PLATTinum Consulting, note that rules about what you can and cannot ask an employee still are at play, which means carefully considering how you go about helping workers without violating employment laws. While unemployment is hitting all-time highs, companies still are hiring, Kleiner notes. And the rules for job interviews still apply. While the updated regulations on family leave account for COVID-19related issues, you still can’t ask job candidates if they have children.
and to have disinfectant around offices, Platt says. “As an HR professional, I have never spent so much time talking about automatic flushing toilets, those hand-free toilet seat covers and soap dispensers,” she says. But those are all things that people and companies had to consider. Companies continually must field questions, such as partitions, door-stop policies so no one has to touch door handles, and plans for how to effectively work with workers who are at higher risk. And company leaders should be aware of how their leadership style is affecting employees. Not only do workers have health concerns, but they are changing work routines, adjusting school routines for their children, and making other lifestyle changes that have them focusing on mental health. Communication will help them get through the changes, Platt says. “If you are not doing it already, this is the time to enhance your two-way communications,” Platt asserts. “You should be proactively seeking input from your employees at every step during this process.” For example, if compensation changes were made, make clear how long they will be in place or if there will be retroactive payments. Employees will have questions about bonuses and raises, especially as a quarter ends or the year comes to a close. Be candid and transparent and provide frequent communication about what you can and cannot do. Admit what you don’t know, while leaving room to consider individual needs that match the company culture, Platt says. Experience has shown her that, if company leaders are not anticipating and answering questions, the rumor mills will start. “In the absence of information, someone is going to make it up and spread the news,” Platt says, adding that such people usually do not have the best interest at heart for employees or companies. Leaders also should understand that workers are re-evaluating everything that they do because of the toll that COVID-19 has taken on their lives. They will be thinking about whether their values line up with the values of their companies, so companies should be sensitive to those dynamics as they set policies. Long-term, the idea is to grow and prosper, which means you will need your best workers, Platt
HELPING EMPLOYEES
Platt, whose company is based in Washington, D.C., says that human resources professionals often are dealing with gray areas in dealing with individuals, which means navigating situations that are not as clear as the law. People will continue to be worried about their own health and the health of loved ones, plus job security and the future of their organizations. “In times of change, what I have learned is that employees just need to have their most basic questions answered first before they can process any of the larger issues,” she says. “They want to know the nitty-gritty.” For example, some of the top decisions companies faced when going back to work in early summer included increased cleaning of restrooms and common areas, requirements for masks and sanitizers, and repurposing meeting rooms. While the CDC suggests that daily cleanings should be sufficient in an office, employee surveys overwhelmingly showed that workers wanted to routinely see cleaning crews The MORTGAGE BANKER Magazine
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says. Continue to evaluate policies to see if they should be adapted. For example, attendance policies should encourage people to stay home if they feel sick, she says. Similarly, companies also should think through vacation policies and what happens if not all time is used before an expiration date. More workers will continue to ask for flexibility, which might include split shifts, different days off, or working remotely some of the time. “There is no right or wrong answer,” Platt says, adding that the decisions need to be based on company culture and needs. “Things are going to change. We are going to continue to evolve, so own that.” MBM
RESOURCES TO USE DURING CRISIS
This article was originally published in the September/October 2020 issue of Reverse Mortgage Magazine, the official publication of the National Reverse Mortgage Lenders Association.
The MORTGAGE BANKER Magazine
While the situation with COVID-19 has been evolving on a nearly daily basis, some resources offer up-to-date information that can help you stay informed. The National Reverse Mortgage Lenders Association (NRMLA) provides a webpage that lists various guides and alerts that you can access by going to www.nrmlaonline.org/reference/anote-to-nrmla-members-regarding-coronavirus. The webpage provides general guidance as well as updates in federal and state regulations. In addition, it provides links to other resources, such as the CDC. Here are some of those resources:
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General FAQ from the CDC: www.cdc.gov/ coronavirus/2019-ncov/faq.html
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Travel-specific advice from the CDC: www.cdc. gov/coronavirus/2019-ncov/faq.html
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Repository of information maintained by Mike Gruley of 1 Vision Advisors: www.drive. google.com/drive/folders/1cAXYkbbaaeO7d JYfHcQW0SSjVYvA3xwN
October 2020
Secondary & Capital Markets
THE NEXT STEP IN THE JOURNEY TOWARD A MORE EFFICIENT AUTOMATED APPROACH By Andrew Bon Salle, Fannie Mae
listed as 1.5 or 1.1, both meaning a full and a half bath. The Uniform Appraisal Dataset (UAD) standardized appraisal data, and since 2012 Fannie Mae has required digitized appraisal reports. With that foundation, we developed Collateral Underwriter® (CU™). Pairing advanced analytics with a database of more than 23 million appraisals, CU is a powerful appraisal risk assessment tool that we provide free to our lenders. Now there is even more. CU enables Day 1 Certainty in two ways:
UMDP, UAD, UCDP, URLA, UCD … the industry calls these acronyms “alphabet soup” and not with affection. They represent industry-wide efforts to create uniform data standards, and the work to adopt them has been a pain point for lenders. But these efforts also reflect a long-overdue investment in data quality and efficiency. Now, we are beginning to see the return on investment. Thanks to data standardization and uniformity, lenders can get Day 1 Certainty™—freedom from representations and warranties on key loan components plus more speed and simplicity.
1. Lenders receive freedom from representations and warranties on the appraised property value on eligible loans with a CU risk score of 2.5 or lower; about 60 percent of all appraisals submitted to Fannie Mae.
THEN AND NOW A little more than a decade ago, residential appraisal reports were not even digitized, with no standard formats even for simple things like dates. Property condition was described in wildly nonstandard, free-form terms such as “Average New,” “Average Old,” and “Typical.” The number of bathrooms in a property might be
2. Enhanced Property Inspection Waivers (PIWs) provide offers to waive an appraisal on about 20 percent of limited cash-out refinances. Lenders get freedom from representations and warranties on property value, condition, and marketability; borrowers can save the cost of an appraisal; and, a shorter origination process benefits everyone.
The MORTGAGE BANKER Magazine
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DATA POWERS INDUSTRY EFFICIENCY Combine standardization with so-called “big data” and that’s the power behind the Desktop Underwriter® (DU®) validation service, another Day 1 Certainty offering. Data power enables a simpler, more accurate digital process. With electronic validation of income, assets, and employment, lenders and borrowers benefit by moving away from the manual processes prevalent in the industry today. Pilot lenders who test-drove the DU validation service told us it brought efficiencies to their business processes, shortening originations by four to seven days with quicker pre-approvals and meaningful time savings for loan processors The MORTGAGE BANKER Magazine
and underwriters. And lenders get Day 1 Certainty with freedom from representations and warranties on validated loan components. CONGRATULATIONS, INDUSTRY! We congratulate and thank our lender and industry partners for making this progress possible through their hard work in implementing data standards. Day 1 Certainty is the next step forward on the industry’s journey toward a more efficient automated approach to originating mortgage loans. We’ve come a long way together … and that painful alphabet soup is now helping to bring pain-relieving Day 1 Certainty. MBM 33
October 2020
Compliance
Seeing the Much Bigger Global Technology Picture BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP
W
hen we were young, we used to cringe when we heard a seasoned individual start a sentence with “Well, when I was your age…” because we knew there was going to be a moral to the story that we probably missed or some representation of their much harder life to the one we have today. My daughter can factually tell her kids and grandkids that she had to walk a mile in the snow to get home. We lived in Lake Tahoe and when it snowed, it was main bus stops only and she, along with her friends, did have to walk a mile or more up the road from the bus stop. COVID and the global impact on our everyday lives will allow this generation the opportunity to spin tales of lore regarding the challenges of work and school from home and the hardships they endured. Technology hiccups will no doubt be an integral part of those tales such as intermittent internet connectivity, latency, and gasp, we had to share one computer. Working from home in our sweats hardly seems like a hardship but a few weeks ago, working from home became a crisis or pretty darn close to a crisis. I kept getting kicked out of the internet while I was trying to work. I filed a ticket with IT relative to my problem. Yes, I rebooted, yes, my internet is connected, and yes, I rebooted the entire internet box thingy… and I still kept getting kicked out. And the magical moment was when the IT guy got booted out, too. I’m only 20 feet from the box thingy so what could possibly be the problem? One of our IT gurus tapped into my computer remotely, went to a website, found my internet box thingy and started diagnosing the problem. And it was a problem… a big problem. My internet connection, pings, speed, and everything else were perfect. There was something else. I was last on the list of households fighting for air space. I live two miles from an Apple Cloud building in a neighborhood whose selling feature is the latest and The MORTGAGE BANKER Magazine
greatest technology. Competition for air space is fierce. Almost every house in my neighborhood was vying for air space for home schooling for multiple kids and computers, phones, people working from home, gaming systems, streaming videos, home management systems, thermostats, refrigerators, pool equipment, etc. The only thing I use out of that group is the work-from-home….and I was last on the list for pulling in air space. I suppressed my desire to turn off “Wally’s Thermostat” and “Ninernation’s” Wi-Fi and worked with IT on the only option available….a 200-foot cable that plugged directly into the internet box thingy through the ceiling and in to my computer. My problem was cured but it did open pandora’s box to ascertain what steps need to be taken if we are going to remain a work-at-home force. Watching the IT person troubleshoot my Wi-Fi issues made me even more aware of the possible threats our company data is exposed to daily. Plus, remote workers are now and will continue to be the new normal for our industry. This new normal highlights the need for a strong technology department and the allocation of resources to that department. The more users there are on the internet, the greater the security gaps. And, if your personnel have figured out how to bypass VPN protocols to do their work, then your security risk jumps exponentially. We are working from home and although home technology needs are somewhat limited, the global picture is much bigger these days. Is your company monitoring the Cloud for abnormal worker behavior? Abnormalities could be the employee doing their job as we often must switch priorities and subjects frequently during the day. Abnormalities could also indicate that someone it attempting to hijack the computer or system and immediately alert IT to any nefarious activities that might be occurring. How does one secure the Cloud at home or 34
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via the company IT department? Is your company using or contemplating the use of AI or machine learning technology for additional security? Does your IT department frequently scan systems for vulnerabilities? One technology area that can significantly mitigate risk is to transition from the BYOD (Bring Your Own Desktop) to company-issued computers. A company owned, programmed, and secured computer has several advantages over allowing employees to use their own computers. Personal computers are likely being used by more than one person in the household. A company computer would be limited in scope as to the software, restrict access to the internet and streaming, and require various authentication protocols to use with periodic authentication during the workday. Because employees are using the company networks, a company issued system will allow IT to easily monitor activity or fix issues by remotely accessing the computer. Buying every employee a computer and having IT secure them takes time and money. We do not want to spend the money right now. Things are The MORTGAGE BANKER Magazine
working fine. Why do we need to change? Take a moment and assess your home setup while pondering some of the following questions: • When the cable guy installed your internet box/ router (the “thingy”) and gave you a user ID and password, did you change them or are you still using the one originally assigned? • Do you have separate passwords for each member of your family using the main computer or does everyone use the same password? • If you have the same password, are the kids tapping into work then leaving that work file open when they get squirreled to the next thing that pops up? • How often do you perform maintenance and updates on the home computer for security software or do you even have security software? • Does your home network have secure firewalls in place and are these updated? • Are you using a recycled router? And if so, how clean is it? And again, did you change the password assignment? 35
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Compliance Noteworthy is that my employer is taking this opportunity to reinvent portability. In addition to issuing the workforce laptops controlled by the company, the old fashion hard drive sitting on a desk is going away. They are being replaced with docking stations at home and work. These docking stations will allow our staff to dock their company issued laptop at the office or home without worrying about plugging in to power, VPN is almost automatic, and no more running the battery down, etc. IT and/or Compliance should continually remind personnel to be wary of emails from unknown recipients or emails which they were not expecting. Phishing scams are on the rise. Personally, I receive at least one email a week from a major title company telling me to click on the link for the revised Closing Disclosure (CD) for some borrower. I do not receive CD’s. I did not request a CD. I have not contacted the title company. I do not open these emails and immediately sent them to my Suspicious Email team members. They, in turn, discovered that the phishing scam went to several employees and immediately blocked the sender and removed the emails. The cycle repeats again the next week because the scammer found another way in the company. The focus of this month’s magazine is technology for operating during COVID-19 but there is one important aspect that is not based on technology that compliance professionals should be monitoring closely: licensing. If the workforce is to remain remote, many of the rules issued in haste for COVID allowing us to deploy a remote workforce will sunset. In early September, several state agencies, the NMLS, CSBS, and the MBA met to discuss COVID concerns around the licensing of a remote workforce: individual loan originators and branch licensing. There is a need to extend the temporary allowances right now and possibly well in to 2021. Perhaps longer. One of the goals of that meeting was to encourage all parties to draft and approve one set of rules (continuity) v. 50 different sets of rules surrounding a permanently remote workforce. FHA has specific guidance on the registration of branch offices, and we need to be cognizant of their guides vs. a remote work force. Do we need to start registering home offices for origination, processing, and underwriting staff? Their guidance states “The Mortgagee must register all branch offices in which The MORTGAGE BANKER Magazine
it conducts FHA business, including originating, underwriting, and/or servicing FHA-insured Mortgages. The Mortgagee must register each branch office and pay branch office registration fees through the Lender Electronic Assessment Portal (LEAP). A 10-digit FHA Lender ID will be assigned to each registered branch office”. I have submitted a question to HUD on the topic of registering the remote workforce and await a response. If everyone taps into the main office to work, is it really remote? Asking for a friend. Maybe it is time for a meeting. Nooooo, not another online meeting where I must have my upper half dressed, hair coiffed, and makeup on. Gather your facts and questions, then gather your participants. • Do we purchase computers that we program and control for 100 percent of the workforce? (Execs and IT peeps) • What is the most recent guidance from every state in which we are licensed? (Execs and licensing peeps) • What is the latest from HUD on a remote workforce and branch registration? (Execs and COO) • Are we in check with labor and OT laws with our remote workforce? (Execs and HR peeps) • Monitor employee burn-out. Chances are your team members have not been taking vacation time and they should. Encourage them to start using up some of that PTO for their own sanity. I reminded my staff of the importance of maintaining their sanity at our last meeting. I had several PTO submissions within a week. • Do employees have shredding machines at home? Are they printing docs with NPI? You should probably ask that question and remind them of the privacy and information disposal protocols. • Please remember to hold staff meetings like the good old days in the conference room. Staff need to be reassured of the company plans, see a face other than the sleeping dog on the floor next to your home desk, and basically interact with other team members. Themed meetings… PJ meeting, worst shirt meeting, a no make-up meeting…. (priceless!) MBM 36
October 2020
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CRA NOTE EXCHANGE: AN EASIER WAY TO BUY & SELL AFFORDABLE HOME LOANS willing sellers who are interested in receiving competitive bids for their loans. If I am a Bank looking to purchase affordable home loans, how do I gain access to the CRA Note Exchange? In order to gain access the Exchange, visit us at www. cranoteexchange.com, where you can “enter” the Exchange and set up a new account. The CRA Note Exchange is powered by the technology provided by Stackfolio and allows you to narrow your search for loans that fit your specific criteria, such as loan size, geographic area, and other factors. Once you find a loan or loans, you can submit a bid to purchase. Mark Tribuna, Senior Advisor mark.tribuna@cranoteexchange.com
Introduction Are you interested in purchasing affordable home loans to support your bank’s Community Reinvestment Act (“CRA”) obligations? Are you an affordable housing authority or organization that is interested in selling your home loans? If so, lend an ear. CBC Mortgage Agency has developed a program specifically for nonprofit entities and other community housing development organizations where your affordable home loans can be sold to banks to help them meet their CRA requirements. The CRA Note Exchange (the “Exchange”) was created to connect potential buyers of affordable mortgages with
What do I need to do if I am an affordable housing organization and I am interested in selling loans on the Exchange? Please email us at info@ cranoteechange.com and we will walk you through the steps of uploading your imaged files through our secure portal. Our Underwriting Team will then review your loans before we post them to the Exchange. Once the loans have been cleared, they will be posted onto the Exchange and will be available for bids. Typically, it takes a 30 to 60 days to garner an adequate bid. Once a bid is accepted, we start the due diligence process with the prospective loan buyer and work with them until the loans are ultimately cleared for funding and the money is wired to your Company.
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Who is CBC Mortgage Agency? CBC Mortgage Agency (CBCMA) is a Native American, public purpose–driven subdivision of a federally chartered tribal corporation, the Cedar Band Corporation. CBCMA’s primary mission is to foster responsible and sustainable homeownership for low- to moderate-income borrowers nationwide. CBCMA accomplishes this mission by operating the Chenoa Fund, which is an affordable down payment assistance (DPA) program administered in the form of second mortgages on either FHA insured loans or conventional loans. CBCMA partners with mortgage originators on a correspondent lender basis to provide these DPA loans for homebuyers. This created a need for liquidity, so CBCMA created the CRA Note Exchange to establish a platform to sell its down payment assistance second mortgages. As buyers using the Exchange have expressed interest in all types of loans, CBCMA decided to open up the Exchange to other purpose-driven entities to help them create liquidity and further their missions. Conclusion Get started today: there is no cost to access the Exchange and bid on loans, or to work with our team to post loans to the Exchange. The Exchange is only compensated upon the successful purchase of loans. Start working with the Exchange today!
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.
The Technology of Examinations
T
he State Examination System is now a year old and growing. Referred to as the SES by regulators, the system is a platform for both single state and multistate examinations. Adoption of the SES and system best practices across state agencies will standardize the supervisory process and hopefully reduce the number and cost of state examinations. While the SES is connected within the NMLS, the SES is separate from licensing and existing users are not shared. The use of the SES for examinations will allow for growth of exam data that can be used for the scoping process with licensing data and company mortgage call reports. This will enable examiners to focus more attention on higherrisk entities. Since its introduction, significant enhancement has been made and new features have been added in the four system releases. The more recent update in mid-September provided a new workflow that allows a state examiner to accept or leverage another agency’s recent examination. This functionality supports the objective of networked supervision by giving
state agencies another tool to collaborate and utilize the work of another agency. This feature will grow in importance as adoption of SES and examinations or supervisory activities are stored in the system. The current record retention is six years. This could reduce concurrent examinations or duplicate information requests as adoption by state regulators grow. But not all information from state examinations is shared between state regulators. While exam schedules, reports of examinations, and company responses to those reports are shared, consumer specific data and company documents are not communicated. For compliant companies, this sharing will reduce workload and should lead to fewer examinations. For companies with challenges, this collaboration between regulators may lead to additional examinations and supervisory actions. Reports put the number of ongoing examinations or investigations completed over 160 as of September 1, 2020. While the SES target is for thirtytwo state agencies to adopt by the end of 2020, currently only about twenty states are
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utilizing the SES. The usage of the SES by a state regulatory agency is discretionary, but with each improvement, adoption is growing. There are also a handful of states utilizing the system for complaint processing and management as that enhancement is being piloted this fall as well. The target for a nationwide release of the complaints platform is the fourth quarter. But will increased collaboration and technology reduce the number of onsite examinations? State leaders agree that the move toward increasing data requests, securing delivery of data, and processing of loan data, including the use of automated compliance tools, has increased in recent years. The work-from-home environment has also shifted to an almost exclusive remote examination landscape in the wake of the pandemic. But remote examinations will not become the only format for examinations. Onsite examinations will remain for follow-up exams as well as targeted examinations for highrisk licensees. Hopefully adoption will grow as a positive result of 2020 and everyone will realize the promised benefits. MBM
Compliance
REGULATORY CORNER FEDERAL COMPLIANCE CFPB SETTLES WITH SEVERAL MORTGAGE BROKERS OVER FALSE LOAN ADS
The CFPB recently issued several consent orders against mortgage brokers that were found to be in violation of the Consumer Financial Protection Act’s prohibition against deceptive acts and practices, the Mortgage Acts and Practices – Advertising Rule (MAP Rule), and Regulation Z. Its sweep of investigations has led to a total of eight cases of multiple mortgage companies that use deceptive mailers to advertise VA-guaranteed mortgages. The CFPB commenced this sweep in response to concerns about potentially unlawful advertising in the market that the VA identified. Here are some: • A consent order was issued against Go Direct Lenders, Inc., a California corporation licensed as a mortgage broker or lender in about 11 states. The CFPB found that Go Direct sent consumers numerous mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures, in violation • Another consent order issued that requires Service 1st to pay a civil money penalty of $230,000 and imposes requirements to prevent future violations. Service 1st Mortgage, Inc. is a mortgage broker based in Glen Burnie, Maryland, licensed in about 12 states. Service 1st also offers and provides VA-guaranteed mortgage loans. Service 1st's principal means of advertising VA loans is via directmail advertisements sent primarily to U.S. military servicemembers and veterans. The CFPB found that in advertising VA-guaranteed mortgages Service 1st sent consumers numerous mailers that contained false, misleading, and inaccurate statements or that lacked required disclosures. • Hypotec, Inc. is a mortgage broker based in Miami, Florida, licensed in eight states. Hypotec offers and provides mortgage loans guaranteed by the U.S. Department of Veterans Affairs. Hypotec advertises its VA-guaranteed loans to U.S. military servicemembers and veterans through using direct mail. The Bureau found that Hypotec sent consumers numerous mailers that contained false, misleading, and inaccurate statements or that lacked required disclosures. The consent order requires Hypotec to pay a civil money penalty of $50,000 and imposes requirements to prevent future violations. • The consent order against Accelerate Mortgage, LLC, a Newark, Delaware-based company licensed as a mortgage broker and lender in about 31 states, requires Accelerate to pay a civil money penalty of $225,000 and imposes requirements to prevent future violations. The CFPB found that Accelerate sent consumers mailers for VA-guaranteed mortgages that contained false, misleading, and inaccurate statements or that lacked required disclosures.
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FEDERAL AGENCIES EXTEND COMMENT PERIOD ON FLOOD INSURANCE Q&AS
The Fed, FDIC, NCUA, OCC, and the Farm Credit Administration recently announced they will extend the comment period on a proposal to revise the Interagency Questions and Answers Regarding Flood Insurance to end on November 3, 2020, rather than the original September 4, 2020. The agencies are extending the comment period because of the extent of the revisions proposed by the agencies and in light of the challenges associated with the COVID-19 pandemic. The extension will allow interested parties additional time to analyze the issues and to prepare comments. The proposed Interagency Questions and Answers, which were issued in July 2020, provide information addressing technical flood insurance-related compliance issues.
NMLS POLICY GUIDEBOOK UPDATED
The NMLS Policy Guidebook has been recently updated and posted to the NMLS Resource Center and the Regulator Resource Center. The changes were made to the Criminal Background Checks Section on pages 61-62 and 96 to: • Explain that fingerprints in NMLS must be no older than three years, otherwise an individual will need to be reprinted. • Explain that new fingerprints must be submitted within the 180-day background check window. • Add an explanation that international applicants will receive fingerprint packages in a traceable manner to their current physical or mailing international address or their employer’s address and that the applicant is responsible for providing a mailing label to facilitate the transmission of the packet.
FRB AND CRA MODERNIZATION
The Federal Reserve Board recently announced Monday an Advance Notice of Proposed Rulemaking on an approach to modernize the regulations that implement the Community Reinvestment Act by strengthening, clarifying, and tailoring them to reflect the current banking landscape and better meet the core purpose of the CRA. The ANPR seeks feedback on ways to evaluate how banks meet the needs of low- and moderateincome (LMI) communities and address inequities in credit access. Board Chair Jerome H. Powell said, "By releasing a thoughtful and balanced ANPR and providing a long period for comment, the Federal Reserve is hoping to build a foundation for the banking agencies to come together on a consistent approach to CRA that has the broad support of the intended beneficiaries as well as banks of different sizes and business models." The Federal Reserve said its proposal will have a 120-day comment period starting when it is published in the Federal Register. Click here for the Fact Sheet on the Community Reinvestment Act issued by the Federal Reserve. In June 2020, the OCC published a final rule to modernize its CRA regulations, with an October 1, 2020, effective date and a compliance date of January 1, 2023. The FDIC did not join the OCC in issuing a final rule at that time, although the OCC and FDIC had jointly issued a proposal. MBM
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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.
Technology Marches Forward
T
his month’s issue of MORTGAGE BANKER Magazine focuses on the technology that is enabling our industry to operate during the coronavirus crisis. Looking back more than six months to when this new reality began, I think we all had a sense of two things: that technology would be crucially important to enabling us to continue working and serving the public; and that COVID-19 would accelerate existing trends toward increased use of technology and the convenience for consumers that it promises. Both of those things have come to pass. Despite the challenges that any such shift brings, technology has in fact enabled our industry and the service providers who support it to keep working, even when health conditions and/or school closures have kept many of us at home. Increasingly consumers are not only becoming used to conducting more transactions online, but also to expecting that
convenience. The initial IT challenges focused on issues like capacity and reliability as well as information security. Regulators quickly moved out of necessity to permit (at least temporarily) the types of remote work and online transactions that frankly should have been permitted all along. It is my expectation that in various jurisdictions those regulatory changes will either be extended or else re-introduced before too long because of industry and consumer demand. From a compliance perspective, these new technologies, and also the increased reliance on these technologies, raise significant challenges that companies need to focus on, but which I am confident they can meet. Less face-to-face interaction will require changes in compliance monitoring of employees working remotely. Companies will need to find solutions for things like branch offices that compliance officers may not be able to visit
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personally. And fraud detection and prevention become more challenging. All of this takes place at a time of record production volume, which both poses its own challenges, but also provides the resources for companies to invest in addressing all of these issues. Companies with a robust compliance management system (CMS) will already be identifying these issues through the natural functioning of their CMS. Companies whose compliance is still limited to checklists of dos and don’ts will need to pay more attention to the risk assessment aspect of compliance. As the acute crisis fades, we expect regulators to be less forgiving in their supervision and enforcement with respect to the challenges posed by remote work and serving consumers at a distance. Ultimately, we have the tools to address all of these challenges and to keep our industry moving forward in these unprecedented times. MBM
C O N N E C T. L E A R N . L E A D .
MBA’s REGULATORY COMPLIANCE CONFERENCE 2020
NOV. 9–10 ONLINE ONLY
In this ever-changing climate, good business is compliant business! Get the latest updates and comprehensive guidance you need to keep your business on the right side of compliance only at MBA’s Regulatory Compliance Conference 2020.
Register today at mba.org/RegComp20
21970
MBA.ORG/REGCOMP20
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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Mortgage Banking Lawyers These attorneys are universally recognized by their peers as setting the highest standard for the legal profession, excelling in all fields – knowledge, analytical ability, judgment, communication, and ethics.
James W. Brody, Esq. Mortgage Banking Practice Group Chair jbrody@johnstonthomas.com 415-246-3995
Roger Fendelman Principal
Marty Green Attorney
roger@garrishorn.com 636-399-0169
marty.green@mortgagelaw.com 214-691-4488 ext 203
James Brody actively manages all the complex mortgage banking litigation, mitigation, and compliance matters for Johnston Thomas. Mr. Brody’s experience centers on those legal issues that arise during loan originations, loan purchase sales, loan securitizations, foreclosures, bankruptcy, and repurchase & indemnification claims. He received his B.A. in International Relations from Drake University and received his J.D., with a certified concentration in Advocacy, from the University of the Pacific, McGeorge School of Law. He was a recipient of the American Jurisprudence BancroftWhitney Award. He is licensed to practice law in California and has been admitted to practice in front of the United States District Courts for the Central, Eastern, Northern, and Southern Districts of California. In addition, Mr. Brody has served as lead litigation counsel for numerous mortgage banking and commercial related disputes venued in both state and federal courts, in a direct capacity or on a pro hac vice basis, in AZ, CA, FL, MD, MI, MN, MO, OR, NJ, NY, PA, TN, and TX.
Roger Fendelman is a managing member of Garris Horn PLLC and CEO of Firstline Compliance. A mortgage compliance technology pioneer with more than 25 years of legal experience, Roger advises both mortgage originators and technology providers on compliance, technology, and automation challenges, with a focus on TILA, RESPA, QM, HOEPA, TRID, HMDA, ECOA and state consumer protection laws. For more than a decade, Roger served as the executive compliance leader of mortgage fraud and compliance technology innovator Interthinx and was the creative force behind PredProtect, one of the first cloud-based mortgage compliance automation solutions. Under Roger’s stewardship, the system became an industry standard for compliance, processing one million loans annually and earning a 2014 HousingWire AllStar award. He previously served in various capacities including compliance manager, processor and underwriter, providing him with an enhanced level of understanding for his clients’ day-today compliance needs.
Marty Green leads the Dallas office of Polunsky Beitel Green, one of the country's top residential mortgage law firms. Mr. Green is an accomplished attorney with more than 20 years of experience in the legal, banking and financial services industries. He is the former Executive Vice President and General Counsel for Dallas’ CTX Mortgage Co. and previously worked with the Baker Botts law firm in Dallas as Special Counsel. In his role as leader of the firm’s Dallas office, Mr. Green advises clients on the latest rules and regulations covering residential lending, in addition to building on Polunsky Beitel Green’s long tradition of delivering loan closing documents with speed and accuracy. Mr. Green is admitted to practice before all Texas state and federal district courts in addition to the U.S. Court of Appeals for the Fifth Circuit. An honors graduate of the University of Texas School of Law, he earned his undergraduate degree at Southern Utah University. Texas Monthly has selected him as a Super Lawyer multiple years.
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The C-Suite
Christina Pham Founder and President JMAC Lending
What do you find most rewarding about your job? Taking care of people – our employees, clients, and borrowers. My dad was a big inspiration to me. He was forever thankful of all the opportunities this country provided to be successful. He taught us to value family and to treat people like family. That’s what we strive for at JMAC and what I find most rewarding.
What time do you get up? 6:00 a.m.
What is the first thing you do in the morning? Check email, of course. Plus, I read industry news and Rob Chrisman’s newsletter.
What do you think is the biggest challenge for the mortgage banking industry currently in the pandemic environment? Change. Adjusting quickly and efficiently to rapidly changing business needs. During the pandemic, we’ve learned to react quickly to significant change and stay future-ready in our focus. The pandemic has forced the industry to operate and grow digitally, resolve challenges, and create new environments at a rapid pace. Accepting and reacting positively to change, the benefits and possibilities are endless. Despite the challenges, I have tremendous confidence in our industry and business. The mortgage industry has always persevered and emerged stronger from periods of significant change. The same guiding principles that delivered us through those times inspire our response today: we keep the interests of our people paramount, and we stay relentlessly focused on helping them succeed.
What is your mantra? Treat people as you want to be treated.
What is on your desk? I keep my desk clean. I am still involved in daily operations. Maintaining the quality of loans and the process of underwriting. So, I have a few files each day.
What is your best habit? Living with integrity. This takes practice and attention. Living in a manner which is consistent with my values, purpose, and goals.
What is the last thing you do at night? Write what needs to be done in the morning and play with my dog, Leia.
What time do you go to bed? 11:00 p.m.
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Accepting and reacting positively to change, the benefits and possibilities are endless.
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The C-Suite The most rewarding aspect of my job is to work with a team of brilliant minds with optimistic attitudes.
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Max Slyusarchuk Founder and CEO A&D Mortgage
What do you find most rewarding about your job? The most rewarding aspect of my job is to work with a team of brilliant minds with optimistic attitudes. These people are excited about their work—they have passion and hunger to make a difference and I’m very happy of their achievements.
What do you think is the biggest challenge for the mortgage banking industry currently as a result of the COVID-19 pandemic? The biggest challenge was to quickly adjust the strategy for our business in the semi-remote setting and to support and keep our team engaged. Our team recharged fast, we supported each other and it allowed us to hold strong and operate at 150 percent capacity and productivity. I am very proud of our team as a whole and every single member individually.
What time do you get up? Usually around 6 a.m.
What is the first thing you do in the morning?
What is your mantra?
First thing I do in the morning is a full body stretch, which helps me to awake physically and mentally. Then I prefer to have a good breakfast, typically oatmeal.
What is on your desk?
Settle for the best.
My desk is my workstation, so I mainly have computers and documents. However, I like to collect antique souvenirs, made of wood or metal. You can see a lot of them around my office.
What is your best habit? My best habit is to ask right questions to the right person and listen to the answers. Although, I also enjoy “Soccer Tuesday” with our team.
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What is the last thing you do at night? The last thing I do at night is reading a book, especially business books. I completely decompress, watch funny videos, and plan for tomorrow.
What time do you go to bed? Typically, I go to bed around midnight, sometimes later.
Education
Education & Training Calendar Date
Dates
Link
School of Mortgage Servicing
October 5 - 16
https://www.mba.org/store/events/education/meeting/igol/ school-of-mortgage-servicing-october-2020?check_for_mini_ site=Y
School of Mortgage Banking I
October 5 - 29
https://www.mba.org/store/events/education/meeting/ classroom/school-of-mortgage-banking-i-october-2020online?check_for_mini_site=Y
The Nuevo Latino Consumer: Build Awareness and Your Bottom Line
October 5
https://www.mba.org/store/events/education/meeting/webinar/ the-nuevo-latino-consumer-build-awareness-and-your-bottomline?check_for_mini_site=Y
Ensuring a Robust Cyber Risk Training Program for Your Mortgage Operations
October 7
https://www.mba.org/store/events/education/meeting/ webinar/ensuring-a-robust-cyber-risk-training-program-for-yourmortgage-operations?check_for_mini_site=Y
Mortgage Accounting Part I: Drilling into Mortgage Accounting
October 7
https://www.mba.org/store/events/education/meeting/ webinar/mortgage-accounting-part-i-drilling-into-mortgageaccounting?check_for_mini_site=Y
Mortgage Accounting Part II: Loan Level Accounting
October 14
https://www.mba.org/store/events/education/meeting/webinar/ mortgage-accounting-part-ii-loan-level-accounting?check_for_ mini_site=Y
MISMO: Introduction to the Uniform Closing Instructions Templates
October 14
https://www.mba.org/store/events/education/meeting/webinar/ mismo-introduction-to-the-uniform-closing-instructionstemplates?check_for_mini_site=Y
LIBOR Transition for Loan Originators
October 15
https://www.mba.org/store/events/education/meeting/webinar/ libor-transition-for-loan-originators?check_for_mini_site=Y
Fast-track Your Employment and Income Verifications
October 15
https://www.mba.org/store/events/education/meeting/webinar/ fast-track-your-employment-and-income-verifications?check_for_ mini_site=Y
Oct 19
Advanced Risk Management for Mortgage Professionals
October 19 – November 5
https://www.mba.org/store/events/education/meeting/ workshop/advanced-risk-management-for-mortgageprofessionals-october-2020-online?check_for_mini_site=Y
Oct 21
Mortgage Accounting Part III: Hedging For Accountants
October 21
https://www.mba.org/store/events/education/meeting/webinar/ mortgage-accounting-part-iii-hedging-for-accountants?check_ for_mini_site=Y
Oct 22
Introduction to USDA’s No Downpayment Loans
October 22
https://www.mba.org/store/events/education/meeting/webinar/ introduction-to-usdas-no-down-payment-loans?check_for_mini_ site=Y
Oct 26
School of Loan Origination
October 26 – November 19
https://www.mba.org/store/events/education/meeting/igol/ school-of-loan-origination-october-2020?check_for_mini_site=Y
Oct 5
Oct 7
Oct 14
Oct 15
Course Name
October 2020
Conferences/Conventions
Instructor Guided Online Course (IGOL)
MBA Research Events
Classroom Course
Webinar
MISMO Events
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Other
Lending Compliance & Risk Management
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Virtual Conference October 26-28th, 2020
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Education
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The MORTGAGE BANKER Magazine
52
October 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
1
Los Angeles-Long Beach-Anaheim, CA
5.90%
-0.90%
477,607
2.911
758
63
19%
81%
2
Washington-Arlington-Alexandria, DC-VA-MD-WV
4.98%
-6.04%
418,376
2.811
756
75
29%
71%
3
New York-Newark-Jersey City, NY-NJ-PA
4.34%
-2.29%
397,844
2.890
750
71
36%
64%
4
Chicago-Naperville-Elgin, IL-IN-WI
3.81%
-5.06%
278,157
2.914
750
76
37%
63%
5
Seattle-Tacoma-Bellevue, WA
3.05%
-1.93%
417,087
2.903
755
68
27%
73%
6
San Francisco-Oakland-Hayward, CA
2.96%
-1.69%
553,751
2.897
768
59
16%
84%
7
Boston-Cambridge-Newton, MA-NH
2.84%
-9.42%
401,939
2.864
757
67
27%
73%
8
Phoenix-Mesa-Scottsdale, AZ
2.63%
0.68%
288,087
2.970
742
74
32%
68%
9
Denver-Aurora-Lakewood, CO
2.50%
-3.74%
359,454
2.881
756
71
28%
72%
10
Dallas-Fort Worth-Arlington, TX
2.36%
-6.91%
292,364
2.915
741
77
42%
58%
11
San Diego-Carlsbad, CA
2.16%
-1.81%
466,220
2.845
758
67
20%
80%
12
Riverside-San Bernardino-Ontario, CA
2.01%
-4.40%
336,634
2.908
737
74
29%
71%
13
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
1.79%
-4.14%
285,983
2.902
746
78
42%
58%
14
Atlanta-Sandy Springs-Roswell, GA
1.78%
1.94%
280,287
2.918
736
79
45%
55%
15
Minneapolis-St. Paul-Bloomington, MN-WI
1.66%
0.69%
284,690
2.846
757
75
35%
65%
16
Houston-The Woodlands-Sugar Land, TX
1.66%
-2.36%
271,345
2.916
735
80
49%
51%
17
Portland-Vancouver-Hillsboro, OR-WA
1.40%
0.39%
338,659
2.900
756
71
28%
72%
18
Miami-Fort Lauderdale-West Palm Beach, FL
1.37%
-1.20%
320,973
2.974
733
76
47%
53%
19
Sacramento--Roseville--Arden-Arcade, CA
1.35%
-4.17%
356,625
2.932
752
70
27%
73%
20
Baltimore-Columbia-Towson, MD
1.32%
-3.65%
331,409
2.867
748
79
36%
64%
SOURCE: Optimal Blue, Plano, TX. Data is based on loans locked within Optimal Blue’s Digital Mortgage Marketplace platform. Optimal Blue operates the leading Mortgage Marketplace Platform, connecting a network of originators and investors and facilitating a broad set of secondary market interactions. Nearly $2 Trillion of transactions are processed each year across the Optimal Blue platform. For more information, please visit www.optimalblue.com or email datasolutions@optimalblue.com. Through actionable data and analytics, Optimal Blue enable mortgage lenders and professionals to visualize and track performance, compare profit margins, and assess the effectiveness of secondary marketing strategies.
The MORTGAGE BANKER Magazine
54
October 2020
Aug-20
Month-overmonth change
Year-over-year change
6.88%
-0.53%
99.22%
0.35%
-1.43%
-27.31%
6,000
-39.39%
-83.43%
Monthly Prepayment Rate (SMM):
2.70%
-0.95%
79.50%
Foreclosure Sales as % of 90+:
0.06%
0.37%
-96.88%
Number of properties that are 30 or more days past due, but not in foreclosure:
3,679,000
-13,000
1,866,000
Number of properties that are 90 or more days past due, but not in foreclosure:
2,366,000
116,000
1,922,000
Total U.S. loan delinquency rate (loans 30 or more days past due, but not in foreclosure): Total U.S. foreclosure pre-sale inventory rate: Total U.S. foreclosure starts:
Number of properties in foreclosure pre-sale inventory: Number of properties that are 30 or more days past due or in foreclosure:
187,000
-3,000
-66,000
3,867,000
-14,000
1,801,000
12 Month Trend
Early-Stage Delinquencies Improve Further, While Seriously Past-Due Loans Rise •
•
•
•
The divergence between early-stage delinquencies and seriously past-due mortgages continues to widen as fewer delinquent loans cured to current status in August Overall, the national delinquency rate fell 0.03 basis points from July after declining a combined 0.85 basis points over the prior two months, a noticeable slowing in the rate of improvement The share of borrowers with a single missed payment had already fallen below pre-pandemic levels; in August, the sum of all early-stage delinquencies (those 30 and 60 days past due)fell 9%, dropping below that benchmark as well However, the improvement in early-stage delinquencies was offset by a 5% increase in serious delinquencies – those 90 or more days
past due – which have now risen in each of the past five months •
August’s rise in serious delinquencies was the mildest of those five months, suggesting that they may be nearing their peak
•
While there are nearly 2 million more seriously delinquent homeowners than at pre-pandemic levels, foreclosure activity remains muted due to active forbearance plans and foreclosure moratoriums
Totals are extrapolated based on Black Knight’s loan-level database of mortgage assets. All whole numbers are rounded to the nearest thousand, except foreclosure starts, which are rounded to the nearest hundred.
About Black Knight As a leading fintech, Black Knight is committed to being a premier business partner that clients rely on to achieve their strategic goals, realize greater success and better serve their customers by delivering best-in-class software, services and insights with a relentless commitment to excellence, innovation, integrity and leadership. For more information on Black Knight, please visit www.blackknightinc.com. Black Knight is a leading provider of integrated software, data and analytics solutions that facilitate and automate many of the business processes across the homeownership lifecycle.
Confidential, Proprietary and/or Trade Secret TM SM ® Trademark(s) of Black Knight IP Holding Company, LLC, or an affiliate. All Rights Reserv ed.
The MORTGAGE BANKER Magazine 55 LLC. © 2019 Black Knight Data Analytics,
October 2020
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The MORTGAGE BANKER Magazine
56
October 2020
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