The Next Step in the Journey Toward a More Efficient Automated Approach

THE NEXT STEP IN THE JOURNEY TOWARD A MORE EFFICIENT AUTOMATED APPROACH

By Andrew Bon Salle, Fannie Mae

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.

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 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:

1.

2. 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.

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.

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 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

Seeing the Much Bigger Global Technology Picture

BY FELECIA BOWERS, HOMEOWNERS FINANCIAL GROUP

When we were young, we used to cringe greatest technology. Competition for air space is when we heard a seasoned individual fierce. Almost every house in my neighborhood was start a sentence with “Well, when I vying for air space for home schooling for multiple was your age…” because we knew kids and computers, phones, people working from there was going to be a moral to the story that we home, gaming systems, streaming videos, home probably missed or some representation of their management systems, thermostats, refrigerators, much harder life to the one we have today. My pool equipment, etc. The only thing I use out of that daughter can factually tell her kids and grandkids group is the work-from-home….and I was last on the that she had to walk a mile in the snow to get list for pulling in air space. I suppressed my desire home. We lived in Lake Tahoe and when it snowed, to turn off “Wally’s Thermostat” and “Ninernation’s” it was main bus stops only and she, along with her Wi-Fi and worked with IT on the only option friends, did have to walk a mile or more up the road available….a 200-foot cable that plugged directly from the bus stop. COVID and the global impact into the internet box thingy through the ceiling and on our everyday lives will allow this generation in to my computer. My problem was cured but it did the opportunity to spin tales of lore regarding the open pandora’s box to ascertain what steps need to challenges of work and school from home and the be taken if we are going to remain a work-at-home hardships they endured. Technology hiccups will force. no doubt be an integral part of those tales such as Watching the IT person troubleshoot my Wi-Fi intermittent internet connectivity, latency, and gasp, issues made me even more aware of the possible we had to share one computer. threats our company data is exposed to daily. Working from home in our sweats hardly seems Plus, remote workers are now and will continue like a hardship but a few weeks ago, working from to be the new normal for our industry. This new home became a crisis or pretty darn close to a normal highlights the need for a strong technology crisis. I kept getting kicked out of the internet while department and the allocation of resources to I was trying to work. I filed a ticket with IT relative that department. The more users there are on the to my problem. Yes, I rebooted, yes, my internet is internet, the greater the security gaps. And, if your connected, and yes, I rebooted the entire internet personnel have figured out how to bypass VPN box thingy… and I still kept getting kicked out. protocols to do their work, then your security risk And the magical moment was when the IT guy got jumps exponentially. booted out, too. I’m only 20 feet from the box thingy We are working from home and although home so what could possibly be the problem? technology needs are somewhat limited, the global

One of our IT gurus tapped into my computer picture is much bigger these days. Is your company remotely, went to a website, found my internet monitoring the Cloud for abnormal worker behavior? box thingy and started diagnosing the problem. Abnormalities could be the employee doing their And it was a problem… a big problem. My internet job as we often must switch priorities and subjects connection, pings, speed, and everything else frequently during the day. Abnormalities could also were perfect. There was something else. I was last indicate that someone it attempting to hijack the on the list of households fighting for air space. I computer or system and immediately alert IT to any live two miles from an Apple Cloud building in a nefarious activities that might be occurring. neighborhood whose selling feature is the latest and How does one secure the Cloud at home or

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 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?

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 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

open Note using CBCM Aloans Exchang e Mortgage purposedriven Corporation missionpayment assistance DPA second mortgage s created liquidit y CB C Agenc y Native America n public subdivision federally chartere dtribal Ceda r Band CBCMAs primaryfoster responsible sustainablehomeownership low moderateincom e borrowers nationwide accomplishe s operating Chenoa Fund affordable program administere d form either FHA insured conventional partner s originators originators correspondent lender lender basi s provide homebuyers need need CRA establis h platform sell buyers expressed interes t type s decide d entitieshelp creat e missions missions Community interested home banks housin g purchasing suppor t Act obligations authority organization organization selling lend ear developedspecifically nonprofi t development organizations sold meet requirements connect potential willing sellers receiving competitive bids loansCommunity Reinvestment tribal sellers THOUGHT THOUGHT LEADER CRA NOTE EXCHANGE: AN EASIER WAY TO BUY & SELL AFFORDABLE HOME LOANS

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 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.

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.

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!