Issue 045 April 2011 TheNicheReport.com
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Times 10 Turbulent 20The Foreclosure 2007 to 2011
FEATURE ARTICLE!
Margaritas & mayhem.
Crisis Causes & consequences.
28 New York CEMAs
What are they and how do they save money?
Up 58 Bringing The Rear Ex-Assistant Treasury Secretary Herb Allison and HAMP.
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CONTENTS
Issue 045
20
April 2011
The Foreclosure Crisis Causes & Consquences
Peter Hébert
NICHE REPORTS Agency & FHA HARD MONEY & NON-PRIME COMMERCIAL ConStruction JUMBO REVERSE MORTGAGE Service Providers
pg 48 pg 48 pg 49 pg 49 pg 49 pg 49 pg 50
FOUNDER & PRESIDENT Robert Pegg robert@thenichereport.com CO-FOUNDER & PRESIDENT David Pegg david@thenichereport.com MANAGING EDITOR Stewart Mednick stewart@thenichereport.com
10 28 30 32 35 6
Turbulent Times 2007 to 2011
42
Justine Assal Owner, acm financial Margaritas & mayhem.
The Niche Report The Niche Report talks with Lisa Schreiber, Executive Vice President of Wholesale Lending.
New York CEMAs Richard Pisnoy Silver Fin Capital Group LLC What are they and how do they save money?
Center Stage with TMS Funding
DEPARTMENTS
EDITORIAL / CONTENT MANAGER Kristen Moser kristen@thenichereport.com ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle Jessica@thenichereport.com Advertising sales Heather Bopp Heather@thenichereport.com
09
note from the founder
Production Manager Henry Suchman henry@thenichereport.com
Aime Wills independent loan processor
37
man on the hill
Production Assistant Dawn Exner dawn@thenichereport.com
Creating a Commission Free Sales Force
39
APPRAISER sound off
Cartoonist Martin Bradford
44
TIP OF THE MONth
46
What's your mortgage IQ?
53
LENDER & RESOURCE DIRECTORY
58
BRINGING UP THE REAR
Do You Have the Lending Yips?
Tim Davis Mortgage Marketing and Sales Coach Go from generating leads to receiving referrals.
What Price Education? BJ BOUNDS Sr. Marketing Communications Specialist, Calyx Software April 2011
COLUMNISTS & Contributing Authors Martin Andelman Justine Assal Lamarr Banks BJ Bounds Tim Davis Karen Deis Peter Hébert Stewart Mednick Richard Pisnoy Marc Savitt Aime Wills
It takes 5 seconds of your time to have us donate on YOUR behalf.
Published monthly by BODA Publishing, LLC PO Box 494, Bentonville, AR 72712 Phone: 866.964.2695 Fax: 703.991.2362 Email: info@thenichereport.com www.TheNicheReport.com
SUBSCRIPTIONS
Help Us Help You!
This publication is intended for real estate finance professionals. If you are a mortgage broker, lender, loan officer, or real estate professional and you do not currently receive The Niche Report, please go to www.thenichereport.com. An annual subscription is $47.95 (twelve months/twelve issues.) For additional copies being mailed to the same address please call 866.964.2695 or email us at subscriptions@thenichereport.com for multi-copy discount. Send address change requests to info@thenichereport.com. Remember to include the old address. To opt-out of receiving The Niche Report, please send your request, including name, company name, and address to opt-out@thenichereport.com.
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Note from the founder
By the time you read this the deadline for the Federal Reserve’s loan officer compensation rule will have been enacted (April 1st). The NAIHP and NAMB have both filed lawsuits in order to try and put a halt to this over zealous rule that would ultimately force many originators to leave the business. Why? Who wants to work five times harder for the same pay? You might as well order up your mortgage at the nearest DMV. Yep, let’s think about that for a minute. Almost as soon as the lawsuits from NAIHP and NAMB were filed, the Fed requested that they be combined into one. Which leads me to my next point – Why isn’t NAIHP and NAMB working together on this and pooling together their resources? It seems obvious to me that they would serve our community much better united than divided. Any hoo, I would like to invite our readers to join us on Facebook and “Like” our page. We have made a commitment to donate $1,000 to the NAIHP legal fund to help support their lawsuit on your behalf once we receive 8500 “likes” to our Facebook page - http://www.facebook.com/TheNicheReport. We’ve decided to help Marc Savitt and NAIHP for a couple of reasons (beyond the obvious fact that we are association members). One, he is a pitbull with ferocious tenacity and he loves this industry for the right reasons. Two, NAIHP filed first. Three, Marc is not afraid to address any misconceptions or questions regarding who he is and what NAIHP stands for. And finally, to be quite frank, NAMB has never come to us and asked for support. I’m not even sure who to talk to over there. Don’t read into that last statement too much. I like NAMB and I think they serve a purpose, it’s just that I get a feeling they don’t want our help – so be it, that is fine and dandy, no sweat off my back. With that said - get on Facebook and HELP US HELP YOU! Once our goal is met, $1000 will go towards your cause on your behalf. With every issue that goes out each month, I get that prideful feeling that each issue is better than the last. This issue is no exception. Along with the usual suspects, we have Peter Hebert with his take on the Foreclosure Crisis. Let me warn you, Peter is one of those industry scholars who performs his due diligence before he tackles a subject. It is a great read and your brain will grow by ten percent. I would also like to introduce to you our new Cartoonist – Martin Bradford. A while back we asked for help (you would know if you had followed us on Facebook!) in finding someone who could provide a political/satirical cartoon to our magazine and website. We had about a dozen submissions and after sifting through them all, Martin clearly popped out as the most talented. Martin is a soft spoken, mild mannered, retired school teacher who lives in Oklahoma. Please welcome Martin to The Niche Report and enjoy his monthly cartoons that will be proudly displayed within the pages of each magazine (pg 26 this issue). Keep up the fight!
Robert Pegg Co-Founder & President
Official
MEMBER
TheNicheReport.com
9
Turbulent Times 2007 to 2011 Margaritas and Mayhem by justine assal
S
itting on a beach on the West coast of Mexico in July 2007 on a family vacation, came a fateful phone call from the office. It was different from the other four calls I had received from them describing what amounts to normal issues in the daily life of a mortgage company. This one had an ominous feel and had certainly sent a chill through our organization. It was driven home further as I sat in the hotel lobby talking to our office manager and saw the trailers on the CNN screen describing the same news as my phone call. One of our wholesale banks processing the majority of our pipeline had closed their doors and was not even honoring approved commitments. It was unprecedented and in hindsight, the beginning of a long and arduous journey that we are all still taking. Although we realized the gravity of the situation, there was no way to fully comprehend what we were about to embark on and the near collapse of our industry, our finances, our businesses, our livelihood! Life is always about perspective and although our journey is never finished, this period of three years will be etched in many minds forever as a turning point! In many ways, it has had the intended effect of industry reform and economic responsibility but no changes in life are ever easy and this one has been so far reaching that it has resulted in many of us buying stock in hair color to keep gray hair at bay.
10
April 2011
Mine Fields As I returned to work from my vacation, ever the optimist, I kept assuring everybody that it was going to be fine and that we simply needed to find a new lender to take the files. National news was reporting the fall of the banking and mortgage industry with a lust that is reserved only for events of National and International catastrophic proportions. In the bubble of our office, we had the ability and need to deal with the sheer enormity of the situation by filtration and avoidance. We had files to close and that is where our attention stayed focused; banks and lenders were falling almost daily. We had to navigate the mine fields and try to keep them safe. Thus started the beginning of our new obsessive compulsion – Implodometer! We logged on daily to see who was on the ailing list so that we could avoid sending our loans into a black hole. We rushed to close loans before the program slipped through our hands into a piece of history. It was much like trying to fill a bucket with dry sand with only your bare hands as tools. We still stayed positive, probably more out of denial than fact or reality. The Age of Denial Thankfully, we as humans, have the innate ability to focus only on the facts that support what we choose to believe. We continued to work on the remnants of a once beautiful and abundant pipeline of loans. By now, they were beaten and battered with many casualties along the way. Our pipeline had come under attack and we were now
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really relying on an old Cooks method to keep our loans moving, which amounted to throwing spaghetti against the wall. As loan programs changed, the niche markets that many of us had spent years courting, disappeared and appraised values decreased. We ceased to operate with the finesse of yesterday; instead with the frenzied, frenetic energy of someone watching the clock and waiting for the buzzer to time out. We were spiraling out of control as if in a trance. We kept pushing through each day as though it were no different than before and just a passing phase to be endured. Banks, lenders, appraisers, mortgage brokers, and real estate brokerages had begun to shut their doors and it had become painfully clear that things would never be the same in our industry. Negativity was rampant and fueled by gossip of what would be. Real estate had become the red headed stepchild and been branded as a bad investment, rendering even the best mortgage programs useless!
Has the bubble burst? As values continued to plummet, just the mention that I was a mortgage broker elicited groans of pity. Mortgage brokers and realtors were taking second jobs and leaving the world of commission for stability. Not surprising, given that
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the only real estate transactions seemed to be those going into foreclosure. Even then, only hardened investors batted an eye at them. The news reported daily that the bubble had not yet burst and that real estate would continue to decrease in value, so better to wait to buy. Fortunately, interest rates had been dropping too. Although in many areas of the country, refinancing seemed out of the question as values had left owners upside-down and dreaming of a short sale not a better mortgage. Fortunately, we were given a tagline to describe the time; we were living “The Great Recession� and along with the collapse of mortgages and real estate, subsequently came every other industry. Nobody was in the mood to buy depreciating real estate, most were happy to have a job and everybody began to hunker down to weather through to the other side. From here, society and our businesses learned to budget. We all learned how much money is wasted on office supplies, unmonitored and unused monthly subscriptions that were auto-debited, phone bills and the like, and our belts began to tighten. This was never more apparent than at a mortgage brokers convention in 2008 that was comprised of four FHA lenders, a bankruptcy attorney, a reverse mortgage company, a cigar and jewelry dealer that took three booths, a cash bar, and a mortgage modification processor; not one gave out promotional items other than cheap imprinted pens, the kind that in better days attendees would have scoffed at, but not these days! It seemed that brokers, bankers, account executives, realtors, appraisers had left the industry en masse and those that remained could hear the echoes. Business was hard won and deals were few and far between unless you were able to attract viable refinances or government business. So much time was spent trying to sort through and find a closable deal that if we had calculated our hourly rate, the rest of us would have undoubtedly left and gone to flip burgers. Survival had become the new success story, even though checking the phones hourly to make sure that they worked had become part of the daily routine.
Here come the rules Quite predictably, the vacuum, which had ensued after the initial mortgage and real estate meltdown, gave way to government intervention. After the appointed committees had reached agreement, the new laws were announced. The new laws have had a layering effect on the process of mortgage origination. No longer does anyone have control over too much of the process. Mortgage Loan Originators were separated from appraisers, thus diminishing the ability to influence the process. National licensing has given a standardized set of rules where before some States did not
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even require a license. New mortgage forms and a strict process to adhere to has raised the level of quality control and required that all mortgage professionals continue to educate and conduct themselves at a standard never before required. New Changes practices were implemented approximately every 6 months. While these transitions did not happen without glitches because the new laws require some tweaking, the overall effect has certainly raised the bar in the mortgage industry. Again, we saw more brokers leave the industry and move on to new ventures. Those that chose to remain were forced to commit these rules to memory and to keep abreast of the upcoming changes as they affected our operations. Even mortgage software companies struggled to keep up as forms were added, amended and completely revamped.
What Constitutes “An Act of God”? The new good faith estimate and HUD Settlement Statements that descended upon the primary mortgage market on January 1st, 2010 left many scratching their heads. Much of the implementation of the new rules was left to individual interpretation for the first couple of months. Each broker, lender, underwriter, processor, title agent, realtor, and indeed, borrower tried to figure out exactly how the forms worked. It was a change that cost most mortgage brokers some money as they learned how to navigate the waters of an unforgiving new process. During the first quarter of 2010, in an unprecedented marketplace, it took a committee to decide what constituted “An act of God” and whether a new good faith estimate could legally be issued. If a good faith estimate was prepared for the product of one wholesale lender and then it came to light that the loan would not be approved, or for some other reason it needed to switch to another lender, a new good faith estimate would be required; if and only if, a change of circumstance was warranted. Herein lay the confusion! The rules regarding this are convoluted and difficult to navigate. Each wholesale lender has their own proprietary forms that must be completed and a different process which must be adhered. The 3/7/3 rule is sometimes 5/8/4 or 7/6/5 depending on whether the wholesale lender used the brokers’ disclosures or their own dateline. By the 3rd quarter of 2010, this had all become old hat for most and a testament to how adaptable we had become. Meanwhile, most of our industry and society in the US had settled into their new budgets and were, for the first time in many years, actually living within their means, and life had again become normal. No more denial about finances and our industry, but an evolution in which we were all taking part. Change can be uncomfortable and 14
April 2011
certainly dealt with by avoidance in most cases, but when it is thrust upon us without choice, we inevitably deal with it and grow from it.
Bankruptcy Becomes the Country’s New “Club” A discussion of a sign of these times would be incomplete if bankruptcy and foreclosure were not addressed. General attitude regarding both have taken a very soft line lately and office water cooler talk has come to include references to attorneys and conversations about who filed bankruptcy. What was once a very private catastrophe that was kept very hushed, has now became the norm. Country Club memberships had been traded for a spot in this club as many in the mortgage and real estate industry found themselves in a precarious position where their income had been decimated so rapidly that they were left without many options. Foreclosures, short sales and all of the other fallout of “The Great Recession” hit those in the mortgage and real estate industries particularly hard as many had also invested their would be savings back into property. Developers sold Bentleys to try and pay the bank interest on their real estate projects. Credit cards were used for mortgage payments. The repercussions of this were still to come, however, once the new National Mortgage Licensing System and State regulatory bodies decided that credit reports would be required on all brokers. This sent a chill of fear through-out an already battered industry and gossip was rampant. The Three Giants We love them and we love to hate them - Fannie, Freddie, FHA. Their relationship with most of the mortgage industry is almost parental, the final word of their wisdom becomes the law that dictates our livelihood, although often resulting in us rolling our eyes and making faces as though we were teenagers. As this process has unfolded, we have come to see just how fragile our mortgage system is and how it has been operating in recent years with very few true checks and balances in place. We have watched as the great giants shook and the government intervened as the stabilizer. We have tried to evolve as the system has veered to the left, and again back to the right, and we have adjusted to very tightened underwriting and frequent changes that come our way. In the spirit of the armchair quarterback, we have all vocalized our support and indeed brandished our criticism at the decisions made for this industry. We have become far more political and speak our positions loudly with soapbox ever ready. It appears from our field position in 2011, that government intervention has succeeded in keeping our giants from falling and although we are left to ponder the price that was paid and will continue,
we can all agree that the price of no intervention would have been exponentially greater.
More Rules Please When one first enters a school or large corporation, one comes in as a rookie and the rules (spoken and unspoken), the schedule; the whole climate is brand new and leaves one feeling overwhelmed and miniscule in proportion. Never again, in that setting, will one’s senses be so sharp as they are as familiarity sets in, knowledge increases and one becomes a moving part of the system so that one can no longer see it in its entirety or splendor. The same is true of any evolution and the change that we have experienced as a nation, an industry, and as individuals, has resulted in a rapidly changing environment in which we are all moving pieces. Survival of the industry has been the crux, but financial survival individually has been the driving force. We now accept rapid and extreme change without so much as batting an eye and new changes are simply absorbed and adapted. 2011 brings many more changes from FHA sponsorship to adjustments in how yield spread premiums are paid. Although each new rule brings its own set of challenges, it seems apparent that all the conspiracy theories regarding the targeted displacement
of mortgage brokers and the wholesale mortgage market shutting down were just theories born of panic and fear. None of the rules have the intended effect of stopping the flow of production within the marketplace, they just require change on our part. Change is something we have learned well!
Real Estate – Is it the Golden child again? Foreclosures, still the bane of the industry, have now been coupled with asset managers, investors, first time home buyers and a litany of mortgage programs designed to help move home owners in foreclosure through the system quickly, although not always efficiently. It has become a bustling marketplace and as more bank REOs continue to filter their way through the system, we are beginning to ride what feels like the onset of a slow but progressive recovery. Mortgage professionals are adaptable and although many did not focus on this niche market before the crisis, they are smart enough to follow the business and are busily closing loans once again. The artificial climate that has kept interest rates so low has allowed many to work on refinances, although most have now learned that it is not wise to put your eggs in one basket whenever possible. The media has certainly softened its rhetoric and is again suggesting that the Nation invest in real estate as bargains
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are plentiful. Such is the way of life as we grow to meet the challenges with which we are faced, and grind along trying to endure. One day, as if a thought bubble appears, one realizes that one is no longer struggling. I have passed through the challenge and completed it without even realizing it was over. The same appears to be true for our industry as people are buying real estate again, mortgage programs appear to have stabilized and hedge funds are investing in mortgage pools. We are all like busy ants running to keep up with new business and so focused on our daily activities that many of us have not noticed that the danger has passed and we appear to be moving in the right direction again. It does make me wonder how many of the lessons I have learned will again be forgotten and how long before we all forget how much we struggled to make it through to this point.
The Final Rule or the Final Countdown? The Federal Reserve rule on broker compensation otherwise known as the Final Rule of Regulation X is just now descending upon us as the latest augmentation to the way that the mortgage industry originates loans. The ruling definitely makes functioning under the license of a “Mortgage Broker� much more restrictive than ever before and essentially cuts the life line of yield spread premium that allows brokers to compete with lenders. Already brokers must disclose the YSP while lenders have no requirement to disclose their SRP or Service Release Premium. Brokers typically earn fees from both borrower and on the spread on the interest rate which has effectively been banned under this new ruling. Although, it does not have the same limitations for a lender who funds the loan. I have been both broker and lender in my career and am somewhat conflicted in my opinion of the Final Rule. Admittedly, I still broker loans that cannot be funded in-house. While brokers are a necessary part of the primary mortgage market, and allow lender costs to stay lower by reducing the amount of staff required to offer availability to the public, we have been allowed to run amuck until recently. It cannot be denied that there are a few unscrupulous brokers who lead borrowers into loan programs simply for their own gain and a system of checks and balances can only help clean up this element. It is also obvious that lenders have far more required reporting, regulatory oversight, and usually a more binding corporate operating procedure than a mortgage broker. It stands to reason, that they not only have the same exact regulations, but the jury is out on whether this tilts the advantage too much. While the ruling certainly promises to cause many of us some heartburn, as stated earlier, I do
18
April 2011
not believe that Mortgage brokers are being targeted for elimination. So for now, as with all of the other changes that we have endured, we shall roll our eyes, complain bitterly, and learn how to live with it in order to still make a living.
On the Horizon It was a beautiful beach, the one that I sat on so blissfully unaware in Mexico, back in 2007. I have acquired many more wrinkles since then that are obvious signs of stress. In hindsight, however, so much growth has occurred as a nation, an industry, a business owner, a mortgage professional, and just as an individual. Change is undoubtedly uncomfortable and given the choice, we would have all avoided the hills that we have climbed in order to remain in the mortgage industry in 2011. We did not have the choice to avoid the turbulence and we might have moaned and complained our way through each step of it. I can say now, without hesitation, that I am glad to have experienced it. I am proud to have made it through all the changes and growth that have occurred. We are certainly older, wiser, and a bit beaten up as an industry, but we can now be proud of the standards by which we work. Our peers have grown with us as we are truly a new generation of mortgage professionals. This year promises to begin healing some of the bruises and a new springtime is in the air. There is the buzz of new energy and businesses have come out of hibernation to renew their marketing and business plans and reclaim their position in the marketplace. We might even see company pens and coozies again before too long, and that is when we know that change has come full circle. I might never visit that beach in Mexico again just out of superstition. However, next time there is a crisis in our industry, if there ever is one, I’m not sure that I would have the fortitude to fight again. You might just see me sipping mojitos from my tiki bar in Costa Rica. Justine Assal originally hails from London, England and has lived in Central Florida. In 1999 Justine is the Owner of ACM Financial Corp and a top originator in volume. She has built a reputation of integrity and tenacity and seems to have a strange attraction to the intense, ever changing world of mortgages and real estate. She is also a GRI 1 Finance instructor for the Florida Association of Realtors and serving as Vice Chair of the Orlando Realtors International Council 2009-2010. Justine has been President of the British American Chamber of Commerce of Central Florida since May 2008 and is currently serving her second term.
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The Foreclosure Crisis: Causes and Consequences By Peter Hébert
“If you pay you stay, if you don’t you won’t.” —The lazy settlement attorney’s explanation of the mortgage
Introduction A foreclosure and eviction is like a judge issuing a guilty verdict followed by a public hanging. There is nothing pleasant about the ordeal. What follows is personal anguish for the homeowner and profit for the speculator. This intersection of loss and gain represents the clearing of the market. The 21st century foreclosure crisis is not about personal wrong doing. Among the many causes are the restructured lending business model, financial engineering, and perverse financial incentives. Consequences will linger beyond the end of the crisis. This series on the foreclosure crisis will explore these issues, the impact on the industry, and more. Foreclosure Types There are three foreclosure types. The first is the result of a real estate tax lien. The second is the result of default on mortgage payments. The third is the result of unpaid assessments. With each, foreclosure is the recourse method for the lien holder.
Unpaid Real Estate Taxes: There are two causes for real estate tax foreclosures. Real estate taxes were not escrowed by the lender, and the homeowner failed to pay the taxes when they came due. Or, absent a mortgage, the debt free homeowner failed to pay the taxes when they came due. The government’s claims on real estate taxes are always superior to a lender’s lien rights. When real estate taxes are not paid, the taxing jurisdiction will issue notice to the property owner of the delinquency. If the homeowner fails to pay the delinquent taxes, the county may sell a tax lien certificate to investors. That becomes recorded as a lien primary to any mortgage. If the homeowner fails to become current within the jurisdiction’s specified redemption period, the investor holding the tax lien certificate may request that the property be sold at auction. When sold, the county transfers the property through either a tax deed or a sheriff ’s deed depending on the state. The Delinquent Mortgage: A promissory note,
a mortgage, and a deed of trust are private contracts. Default constitutes breach of contract and initiates the foreclosure process. If the borrower does not cure the default by either becoming current or selling the property, then a foreclosure followed by the household’s eviction will take place. In the 23 judicial foreclosure states, lenders must demonstrate standing in court and the homeowner has the right to defend the claim to the property. Foreclosures in these states occur with judicial consent. In the 27 non judicial foreclosure states, the trustee on behalf of the investor initiates foreclosure outside of the court. Unpaid Special Assessments: A condominium or homeowner’s association that levied a community’s residents with expenses forced some into hardship. In an aging condominium project, plumbing, heating, air conditioning, and roofing-related expenses can result in major costs that exceed what is in the reserve fund. Typically, those costs are spread out over four to five years and apportioned to each unit owner. When special assessments are high across a retirement community, foreclosures are predictable.
Reasons for Foreclosure A common misconception about foreclosures is that households were irresponsible. CNBC’s Rick Santelli on the floor of the Chicago Mercantile Exchange called delinquent homeowners “losers.” Bruce Marks of Neighborhood Assistance Corporation of America, in contrast, viewed delinquent homeowners as victims of unsuitable mortgages given their financial circumstances. Loss of financial control, or force majeure, is the reason for homeowners in foreclosure. Traditional Underwriting: Agency underwriting required borrowers to have a 20 percent equity stake and housing costs limited to 28 percent of their verifiable monthly income. This underwriting approach also required good credit and mortgage insurance to cover the loan amount over 80 percent loan to value. The leading causes of mortgage default and foreclosure have historically been loss of employment or a decline in income, health problems or medical bills, divorce, an inability to sell another property, death of a spouse, and interest rate adjustments in that order. These financial shocks invariably result in loss of income, hardship, loan default, and an increased likelihood of foreclosure.
When loans were traditionally underwritten with due diligence and concern for the suitability of the borrower, foreclosure rates were negligible. In the 1950s, foreclosure rates were between a low of .04 percent in 1953 and a high of .12 percent in 1959. In the 1950s, the average loan-to-value ratio was 70 percent. In 1980, the foreclosure rate for Federal Housing Administration mortgages was .73 percent. In 1997, the foreclosure rate increased to 2.47 percent. Comparatively, the foreclosure rate for conventional mortgages in 1980 was .31 percent. In 1997, conventional foreclosure rates increased to 1.04 percent. During that period, the average loan to value ratio for conventional mortgages increased from approximately 70 percent to 80 percent. The increase in the default and foreclosure rate can be attributed to the “peace benefit” after President Ronald Reagan left office in 1989 since home prices collapsed in some markets and foreclosure rates spiked. The overall low default rates during this 17 year period, however, was the result of prudent underwriting, adequate equity, and a gradual increase in home values resulting in increased wealth. These factors contributed to low default and foreclosure rates. Restructured Business Models: Prior to the 1970s, savings and loans and mutual savings banks originated and serviced mortgages for their firm’s customers. With the advent of securitization, mortgage management changed. Mortgage origination and servicing were spun off as different businesses. Loan servicing and loss mitigation or forbearance was transformed through national servicers, who had no ties to borrowers and a lower likelihood to grant a forbearance or modification. In fact, third party servicer foreclosure rates significantly increased in the 1980s and 1990s. The correlation between a foreclosure and a third party servicer is remarkably strong. The servicing business model created needless foreclosures. Conflicts of interest were built into the relationships among the customer, servicer, and investor. Servicer interests were never aligned with borrowers or investors. The investor, not the servicer, has a stake in the mortgage. The servicer has a stake in the fees that can be charged and collected from borrowers. During the economic and foreclosure crisis, servicer profits increased, because they charged fees from more borrowers, who fell
behind on payments. Servicers frequently heaped unjustified fees, refused payments from borrowers, and initiated foreclosure even when no legal authority to foreclose existed given the absence of the right, which requires having the promissory note in hand, evidence to support all questionable fees, and the presence of the investor’s authorized representative. The problem is industry wide, and not limited to defunct companies like Ameriquest and Countrywide. Miami, Florida-based attorney Michael A. Frank and University of Iowa law professor Katherine M. Porter independently came to the same conclusion. Frank has succeeded in securing default judgments against his clients, who the banks had victimized. Porter said: What I found is banks failed to attach a copy of the promissory note that’s the evidence of the consumer owes the debt in 40 percent of the situations. Four out of ten consumers were being asked by their bank to make payments on a mortgage but the bank didn’t provide the evidence to establish what those debts were. Porter examined 1,700 loans in order to arrive at the conclusion. Her findings suggest that predatory lending runs the gamut from origination, servicing, and
foreclosure. Oftentimes, the U.S. Trustee in Chapter 13 bankruptcy proceedings became the only protective recourse for borrowers. Those who sought bankruptcy protection found that the unjustified fees that had made repayment more difficult were stricken by the court. Loan servicers take a dual track when borrowers go into default—they explore the modification for the borrower and initiate foreclosure for the investor—at the same time. Sometimes, miscommunications occur between the servicer and the attorney, and foreclosures take place anyway—even after the modification has taken place and the borrower has made payments. Societal Trends: Consider three trends that increase the risk of foreclosure—self employment, divorce, and a lack of financial literacy. The Alt-A mortgage increasingly met the credit needs of self employed borrowers. Even though self employed household income is 65 percent more than the wage earner counterpart, an increase in self employment ventures place households at greater risk given that the majority of business failures are concentrated in small ventures. Strong correlations exist between a rise in foreclosures and business failures, lack
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of health insurance coverage, and personal bankruptcy. Cash out refinances became increasingly popular as a means to buy out a spouse’s equity claim to real estate. A divorce accompanies a rise in household expenses without a corresponding rise in income. A decrease in the household savings rate, an increase in the use of credit due to tax inducements, the confusion of cash with credit, and a lack of financial literacy placed many at greater risk. A lack of savings, increased household debt, and pyramiding mortgage debt through repeated refinances are greater contributing factors to the risk of foreclosure than little home equity due to a high loan-to-value ratio mortgage or even temporary unemployment. These trends contributed to more credit debt, more bankruptcies, and more foreclosures. Layered Risk Underwriting: Non-traditional lending existed on the margins in the 1980s. Peripheral products mainstreamed and expanded the marketplace. Mortgages with layered risk originally designed for a unique niche became a confusing abundance of mortgage credit. Risk layering in product design and underwriting led to the foreclosure crisis. Elements included reduced
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documentation, simultaneous second mortgages at closing, low introductory interest rates on adjustable rate mortgages (ARMs), borrowers with a demonstrated inability repay as agreed, no real estate tax escrow requirements, and non owner occupied borrowers. Subprime underwriting permitted borrowers with credit scores below agency requirements to secure up to 100 percent financing with stated income documentation. Sometimes, the property did not comply with these agency’s guidelines. When given the option between a 30 year fixed rate and a short term ARM, many chose the ARM due to the lower payments and belief that future risk from higher payments would be offset by the property’s appreciation followed by a refinance or sale of the property. Those short term ARMs, however, were designed to lock borrowers into the loan and extract payments and penalties for the benefit of both the bond holder and servicer. With a three year prepayment penalty engineered into the 2/28 ARM, either a payment shock or a prepayment penalty often resulted in severe financial stress. These loans were not designed to sustain homeownership. Many borrowers defaulted and made up the first wave of foreclosures. Alt-A underwriting permitted borrowers to overstate and misrepresent income. Lender-directed fraud occurred when loan officers calculated the debt-to-income ratios while working with loan origination software in order to get the borrower qualified rather than ensuring an actual ability to repay. First, a software generated credit score issued by the three credit bureaus was needed. Second, a letter from a certified public accountant required by underwriters was meaningless, because even when legitimate, no validation of income was required. Third, many underwriters checked the borrower’s probable income by using the 75th income percentile at Salary.com. This percentile represents the higher end, not the middle range, for compensation paid within a geographical area for a position. Option ARM underwriting originally had the high income, high net worth executive in mind. Over time, this loan moved from financing estates on Lux Lane to bungalows on Maple Street. Option ARMs left homeowners with negative equity in declining markets and little incentive to keep paying on a non investment. Risk layering that caused the crisis led to a 4 percent national average foreclosure rate in 2008. The major lenders, however, had mortgage default rates in their servicing portfolios that approached 15 percent in 2010.
Between the 2007 and 2010, about 8 million families fell behind on payments and entered the foreclosure process. Of those, 3 million families lost their homes. In 2010, the foreclosure rate was three times greater than in 1933—the start of the Great Depression. Peter Hébert is a mortgage finance and real estate industry subject-matter expert and CEC trainer with a master of business administration degree in finance and marketing from Mount St. Mary's University in Emmitsburg, Maryland. Hébert is the author of Mortgaged and Armed (Freedom House Press, July 2010), which is available on Amazon.com. His upcoming books are The Collapse of Home Prices and the Foreclosure Crisis and Predator Nation. Both will be available in 2011. He can be reached at PeterHebert@verizon.net. Reference End Notes HeritageFoundation, “CNBC's Rick Santelli's Chicago Tea Party,” You Tube, February 2009; Online at /www.youtube.com/watch?v=zp-Jw5Kx8k&feature=related.
Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Page 1; Online at www.fdic.gov/bank/analytical/working/98-2. pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Appendix A, Pages 21 and 22; Online at www.fdic.gov/bank/ analytical/working/98-2.pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Figure 3, Pages 28; Online at www.fdic.gov/bank/analytical/ working/98-2.pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Figure 4, Page 29; Online at www.fdic.gov/bank/analytical/ working/98-2.pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Pages 11 and 12; Online at www.fdic.gov/bank/analytical/ working/98-2.pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Figure 12, Page 37; Online at www.fdic.gov/bank/analytical/ working/98-2.pdf.
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“Committee Investigates Allegations of Fraudulent Mortgage & Foreclosure Practices,” C-Span, November 16, 2010; Online at http://www.c-span.org/ Watch/Media/2010/11/16/HP/R/40792/Cmte+Investigates+Allegations+of+Fra udulent+Mortgage+Foreclosure+Practices.aspx. “Homes Foreclosed on Illegally, Illegal Foreclosures is a National Problem,” CNN, June 22, 2008. Kathy M. Kristof, “U.S. investigates Countrywide fees, The mortgage lender is subpoenaed over charges to homeowners in bankruptcy,” Los Angeles Times, November 29, 2007. Gretchen Morgenson, “Foreclosure Charges by Lender Investigated,” The New York Times, November 28, 2007. Kamberali Shamji inside Harriet Johnson Brackey, “Those with loan modifications still lose to foreclosure,” South Florida Sun-Sentinel, October 23, 2010; Online at http://www.istockanalyst.com/article/viewiStockNews/ articleid/4606130. Lynn A. Karoly and Julie Zissimopoulos, “Self-Employment Trends and Patterns Among Older U.S. Workers,” WR-136, RAND Corporation, December 2003; Table 7; Online at http://www.rand.org/pubs/working_papers/WR136/WR136. pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Figure 5, Page 30; Figure 10, Page 35; Figure 11, Page 36; Online at www.fdic.gov/bank/analytical/working/98-2.pdf. Peter J. Elmer and Steven A. Seelig, “The Rising Long-Term Trend of SingleFamily Mortgage Foreclosure Rates,” Federal Deposit Insurance Corporation, February 1998; Page 16; Online at www.fdic.gov/bank/analytical/ working/98-2.pdf.
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New York CEMAs What are they and how do they save money?
by richard pisnoy
M
ost borrowers wonder why their closing costs are so high in New York when purchasing or refinancing their homes. The reason that New York transactions have some of the highest closing costs is because New York is one of a few states that charge a mortgage tax. A mortgage tax is imposed for the privilege of recording your mortgage in your county. I will leave it for a future article to debate the fairness of a tax on those who need a loan to purchase a home. Or the irony that the state will earn more on most transactions through the mortgage tax than the lender will for providing the loan. In New York State, mortgage tax is based on a percentage of the loan amount and varies from county to county. For example, in Nassau County the mortgage tax rate is 1.05 percent of the loan amount while in New York City the rate is 2.05 percent of the loan amount (and even higher for loan amounts above $500,000) The new lender is required to pay 0.25 percent of those costs,
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with the borrower paying the balance. Simple math shows that in New York City, for example, a $500,000 loan would have a borrower paying $9,000 in mortgage tax ($500,000 X 1.80 percent). One might think that a borrower would only need to pay this tax on one occasion. However, during a refinance, often times a borrower is left to pay the entire mortgage tax again. Not such a great deal, especially when a borrower paid the mortgage tax already. Well, before your borrower starts to cringe at the total amount of the closing costs associated with a New York loan, you can inform them about something called a Consolidation Extension Modification Agreement, better known as a “CEMA.” A CEMA allows the borrower to pay mortgage tax on only the difference between the principal balance of their existing loan and the new loan amount that is being taken out. So if the borrower has a principal balance on his or her existing loan of $500,000 and the new loan amount is $510,000, the mortgage tax is based on a percentage of only $10,000 (the “Gap Money”). This could save your client a tremendous amount of money and win you the deal if your potential clients are shopping their loan.
How does this work? When a borrower refinances an existing mortgage, they can avoid having to pay mortgage tax a second time by having their existing lender assign their mortgage to the new lender. Both the existing lender and new lender would need to agree to have this done. Assuming that both lenders agree, the existing lender will prepare a document called an Assignment of Mortgage (“Assignment”) and the new lender will prepare the CEMA. The Assignment and the CEMA basically tie together the existing mortgage with the Gap Money mortgage. The terms of the existing mortgage and the new mortgage are then restated in the CEMA. Although less common, CEMAs are also a wonderful tool for borrowers looking to purchase a home. A purchaser can avoid paying the mortgage tax by having the seller’s lender assign their existing mortgage to the purchaser’s new lender. Both the seller’s lender and buyer’s lender would have to agree to this procedure. If they agree, the seller’s lender will prepare the Assignment and the purchaser’s lender will prepare the CEMA. The result is that the purchaser will only pay the mortgage tax on the Gap Money. In this situation, the Gap Money will be the difference between the principal balance due on the seller’s existing mortgage and the amount of the purchaser’s new mortgage. The good news here is that this will benefit both the buyer and the seller. The seller benefits because he or she can take a “continuing lien deduction” up to $500,000 of the existing lien transferred. The result of this is that the transfer tax that the seller is responsible for paying to New York State can be reduced by up to $2000. This can also be a sales tool to help assist potential buyers to purchase a home; especially if they have a limited amount of assets. Now before you go and jump for joy about CEMAs, it is important to know that not all CEMAs will go through and not all lenders will allow you to originate them. In speaking with Corey M. Gindi, a partner with Abrams Garfinkel Margolis Bergson, a New York-based law firm experienced with refinance and purchase CEMAs, there are many issues that can arise. “When loans are bought and sold by lenders many of the important original documents are lost in the physical transfer of the documents between lenders. Notes disappear and in some cases even entire files can disappear. In addition, not all lenders will agree to assign the existing mortgage to a new lender. The lender may not want to lose the loan to
another lender and will only assign the existing mortgage if the borrower refinances with them. Although most lenders will assign their mortgage to another lender, it is not mandatory that they do so.” In addition, a CEMA will cost a borrower approximately $1,500 in attorney and lender fees and could possibly add several weeks to the loan process. So you will have to sit down with your borrowers and determine whether a CEMA makes sense for their loan scenario. It also helps to know which lender holds the existing mortgage. Some lenders, like Bank of America, are notoriously slow (3 months), while others, like GMAC, can be relatively quick (2 weeks). All that being said, I can tell you that in my experience, the vast majority of CEMAs will go through and your clients will save thousands of dollars. A good loan officer will assist his or her clients in trying to reduce the client’s closing costs. A CEMA is a terrific method for achieving this objective. Your clients will think that you are a superstar and looking out for their best interest. In a market where each loan officer should be trying to build his or her book of business, helping clients navigate the sometimes murky waters of home finance to save thousands is sure to give you a competitive advantage. Richard Pisnoy is a Principal with Silver Fin Capital Group LLC, a New York-based mortgage brokerage providing residential and commercial financing. Pisnoy has 20 years of experience in the areas of sales, management and mortgage finance. He is currently working on his first book which has a working title of “Dodd Frank: Whose Really to Blame?” He resides in Manhattan with his wife, Jennie, and son, Max.
Do you have the lending yips? by aime wills
A
strange thing happened as I sat down to write this article: I got a case of the yips. As someone who has been in the real estate industry for almost ten years, who has experience writing in a variety of fields, and who actually has a lot to say on the matter I intended to write about, I really couldn’t blame my non-performance on anything else other than the yips. Sure I could source my distraction from any one of several current stressful events in my life, but when it came down to the wire I just had that nervous tension that inexplicably causes an athlete to fail. Yep, the yips! With all of the turmoil in our industry, I know I am not the only one who feels like it is a lot harder to close loans, even simple loans. And, at times it is not just harder, it is much harder. The unique part of being a loan processor is that I can observe how many different Loan Originators run their business. Even in today’s climate I know Loan Originators who are having very successful months and are maintaining a healthy stream of business. Unfortunately, I also know Loan Originators who are struggling to pay their rent every month. If you are one of the latter, could it be that you have nothing more than a case of the lending yips? 30
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I did some quick research (thank you, Google) and came across Golf-Mental-Game-Coach.com that outlined three steps to the cure the golf yips, but they seem appropriate for the lending yips too.
#1: Break your typical routine If you find yourself with a case of the lending yips, I think this is the most important step of all. As someone equally neurotic about her routines as you may be about yours, I can tell you this first step does not sit well with me. I have come to enjoy my daily work routine, even in its moments of chaos and disorder. But our routines, which are supposed to be a source of structure and control, often add to the impending collapse of work as we plan it. Before you can change your routine, you have to take a look at it, and I mean really scrutinize it. What you find may surprise you. Do your personal errands sneak into the office and take over? Does today’s todo list roll over to tomorrow, and then the next day, and then the next? Do you sometimes not accomplish more than clearing your email box (or worse yet, do you never clear your email box)? Do you spend the bulk of your day on one impossible task when you could have accomplished several more manageable tasks? Once you have found a problem in your daily
routine, work on fixing it. I know one of my weaknesses is time blocking – which I remember learning about at my very first mortgage conference and countless times over the years. Why do time management professionals continue to push this idea? I will give you one guess: Because it works. Until recently, I have avoided time blocking like the plague mainly with the excuse that if an emergency were to arise, I want to be able to take care of it immediately. My thinking was flawed, I realize that now. I started with one hour, one day a week to attend to administrative duties in my office. Within a few weeks, I had accomplished so much that I was seeking out things to do during that time. What a change from a short time before when I had a daunting list of things I could not squeeze in my schedule. What surprised me more was that as I really started looking at my schedule I also had several informal time blocks in place. Every day when I come in the office I review and organize my emails and watch/read my daily training material as I have a cup of coffee. A slow way to start the business day? Perhaps, but it allows me a few minutes to take off my mother/ wife hat and put on my business hat. I never realized that these first 15 minutes of my day, though not written on any calendar, are my most valuable time block and a staple in my daily routine.
#2: Stand behind your “ball” For an athlete, the ball is what makes them their money. It is the primary tool for success. As a Loan Originator, you too have tools for success in front of you. Your networking, your marketing, your support team, your processes – all these and more take you from second string to MVP. I don’t want to oversimplify this, but this will be different for everyone since no two Loan Originators do their business exactly the same. However, there is one very common element amongst all Loan Originators – your clients. Are you really working your hardest to OBTAIN their business, MAINTAIN their expectations during the loan process, and RETAIN them as lifelong clients? While you might have a strong support staff for keeping in contact with your clients during the loan process, ultimately they are your clients. They are the only indicator of your success. Think about it – behind every “funding,” “loan,” or “file” are clients who trust you with one of their most cherished assets – their home. As a loan processor, I have observed an interesting
phenomenon. In the majority of cases, by the time a file has come to my desk your clients have already decided how they feel about the lending process. They either love you… or don’t. Maybe this is just me, but I am never excited to talk to the clients that don’t love us, and I’ve often wondered if they pick up on these vibes. No matter what is going on behind the scenes, put on your game face before communicating with your client.
#3: Recall the last time When was the last time that a loan went exactly the way you wanted it? The longer ago it was, the higher the indicator that you are doing something wrong. Yes, I said wrong. If the process is not going as you dream it to, there is something that needs to change. Humor me on this one – instead of looking at what goes wrong, consider what goes right. As I write these words, I am thinking of the last smooth file we had, and I can immediately come up with the following strengths in the file: the borrower provided us with all of the documentation we needed, we communicated clearly with him through the entire process, and we never once told him any less than the absolute truth. The fact that this borrower inherited the subject property – in need of repairs with a lien and judgment on title – and he had a rental home out of state that was worth half of what he owed against it, did not make the process painful. What if loans go bad, not because of the particulars of the loan, but because of us? Fear can cause us to freeze up, and in lending this could look like making excuses for not finding new clients, avoiding making those painful phone calls, or even just allowing ourselves to be distracted by life. If you can not work out your yips, you may find yourself in a bad position. As Wikipedia rightly said, “Professional or leading amateur sportsmen affected by the yips sometimes recover their ability, sometimes compensate by changing technique, or may be forced to abandon their sport at the highest level.” Don’t let your lending yips force you out of a career you love. Stir things up, cherish your clients, and keep it positive. Wishing you all a yip free month! Amie Wills is a fully licensed independent loan processor in Torrance, CA, who works with both wholesale brokers & retail branches. To contact Amie, email her at amie4loans@ gmail.com.
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Creating a Commission Free Sales Force Go From Generating Leads to Receiving Referrals
By Tim Davis
A
fter 17 years in this industry, I have discovered an interesting fact: There are very few, and I mean very few, people who call leads that are generated. Some may put them into an email drip campaign, but it is rare to find that person who will actually pick up the phone, call the lead, and then build enough rapport to convert them into a client. Years ago I began a call capture program for my Realtors. We generated hundreds of “leads” but the agents would not call them. They are really no different than anyone else in sales. I have talked to thousands of loan officers who have programs that generate “leads,” but very few of them call and follow up on these “leads.” Most of the time, the lead either goes uncalled, or at best, put into some automated email program, neither of which produce closed loans. Why? Because everyone says that they want more leads, but what they really want are more referrals. Here is the big difference between a lead and a referral. A lead is a person who we have to “sell” and
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a referral is someone who is already “sold.” When you develop a referral, he or she have already decided that you are the expert and you can begin working on originating the mortgage for him or her.
Step ONE: Clearly Define Your Target Market In order for you to begin receiving more referrals you have to take time to clearly define your ideal client. I recently worked with an originator who was incredibly frustrated by the poor quality of referrals he was generating. After asking him to tell me what he shares with agents when he meets them, he said he lets them know he has a program that can assist buyers with a credit score as low as 580. After learning this, I understood exactly why he was getting unqualified clients. He was fishing with the wrong bait. In life, you will truly receive what you ask for and I have found that when it comes to agents, if you tell them you work with lower credit scores, do not be shocked when that is who they refer to you. Getting referrals all begins with how you answer this question: “Tell me what you do for a living.” Be specific when you tell people what you do and who you help. For example, if you want to work with first time buyers do not just say, “I work with first time
buyers.” Instead rework your commercial to say… “I specialize in helping first time home buyers who have established good credit, have a minimum of 3.5 percent as a down payment, and are looking to buy a home in the next 60 days.” If you make your commercial very specific and let everyone know, you will begin to receive referrals of people who you can help. Once you have developed, practiced, and mastered your new infomercial, then you will need to spread the word. Consider joining a business networking group, attending local chamber meetings, and joining local Realtor associations. No one will ever learn about you unless you spread the word. I would actually think of it as a game. I would go out to these meetings armed with my infomercial ready to see how many referrals I could generate. The more it worked, the more meetings I attended. Here are the keys to defining your target market: 1. Define the customers you most enjoy helping 2. Eliminate the mentality that narrowing your focus will hurt your pipeline
3. Identify three pains they have about originating a mortgage 4. Develop solutions to these pains 5. Specifically define the qualities the client needs for you to help them
Position Yourself and Your Brand as the Expert Once you have defined your target market, then you need to make sure that your image tells them that you are the expert. If you wanted to position yourself as the first time homebuyer expert, then all of your material should be geared towards their needs. In other words, all of your marketing materials should say to your target market: We understand your needs and we can help solve your problem. Here are some examples: • Your website should speak to your target market • Your collateral material including your business cards, flyers, and special reports should speak to your target market • Your image including how your dress, answer the phone, and voice mail should let your market know that you understand them If you really want to increase your credibility,
influence, and referrals then you should also consider adding speaking, writing, and presentations to your arsenal. Speaking is an incredible way to build your brand. Consider developing a topic for your target market that tells them: 1. You identify with them 2. You have solutions for their problem 3. Your brand is the “go to” expert Once you have your presentation, you are ready to find places where you can speak to either your target market or referral partners who can connect you with your customers. Your presentation can easily be converted into blog post, reports, and even a book. When you decide to really ramp up your credibility, it is important that you go all in. I have found that while everyone can originate the same loans, it is the loan officer who is willing to step outside the box, develop a brand, and claim the market that wins the referral. Creating a referable brand requires an investment of time, money, and resources, but the pay out is many times the investment.
Attract and Work with only the Best Referral Partners By completing the first two steps, this step will begin to take care of itself. You will need to make sure that you clearly define the referral partners and agents with whom you want to partner. Too often, I see loan officers ready to lower their personal standards to work with agents who waste their time or simply do not have the same level of business professionalism. The mortgage industry has taught us to work with any agent who has a pulse, but we soon realize that some people are simply more trouble than they are worth. Early in my career, I discovered that I did not have
to work with every agent. I did want everyone to know who I was, but I decided to be selective with the referral partners that I invested the majority of my time and resources in business. I sat down one weekend and wrote out the qualities of a person who I wanted to have as a referral partner. Here is my list, but I suggested that you create your own: • I will choose to only work with full time real estate agents • I will choose to only work with agents who have a strong desire for gaining knowledge • I will choose to only work with agents who have a sense of urgency about their business • I will choose to only work with agents who are committed to building strong referral relationships • I will choose to only work with agents who act proactively in their business and with their clients • I will choose to only work with agents who invest in themselves, their business, and their customers I developed the following mindset: I am not looking for anyone, instead I am looking for someone. You do not have to work with everyone. You can choose. When you understand that principle, you will feel empowered, confident, and your business will grow. Everyone wants more referrals and getting them is easy if you get committed, take action, and stay consistent.
Tim Davis is a Mortgage Marketing and Sales Coach who works with loan officer and companies to increase their production, passion, and profitability. Davis is the host of The Originators Guide podcast on i-Tunes and you can find his video blogs at http://www.theorignatorsguide.com and http:// www.timdavisonline.com You can also follow him on Twitter @timdavisonline or facebook at http://www.facebook.com/ timwdavis
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What Price Education?
By BJ bounds
I
n the past few years, education for loan officers, along with more stringent rules for the industry, has been pulled forcefully into the limelight. With the advent of the Secure and Fair Enforcement Mortgage Licensing Act (SAFE Act) in 2008, the federal government put in place a requirement for all loan originators to be licensed and registered with a national database maintained by the National Mortgage Licensing System (NMLS). The requirements for education, testing and certification have decreased the number of loan officers in the United States. However, for those that meet the requirements, the training they complete significantly increases their chances in succeeding in the industry—learning is the key to earning. Education is important for success in many industries. Requirements vary, but the result is the same—standardization of knowledge and the ability to accomplish something further with the success of completion. When it comes to the mortgage industry, becoming certified in NMLS is only the first step the staircase to personal and professional growth. The importance of education continues in a loan officers’ daily work life—with the tools they need for everyday business.
Learning the Tools Take, for instance, one of the most important tools in a mortgage professional’s arsenal; the Loan Origination System (LOS). The purpose of an LOS is the make processing a mortgage loan as painless as possible for both the mortgage professional and the client while complying with state and federal regulations. A strong LOS platform will provide end-to-end functionality that will make the process smooth and effortless. That saves time and frustration for everybody involved—and that helps with client satisfaction and referrals. But streamlining your processes using an LOS is not instantaneous. To use a tired but applicable phrase, “you must pay to play.” In other words, just like you learned everything you needed to know about the processes and laws involved in being a mortgage professional, you must also learn how to squeeze the most out of your software platform. It’s not hard, but there are always tricks of the trade—shortcuts and features—that you can learn to make your processes the best they can be. It’s not about running credit So many LOS users under-utilize the tools at their disposal. This is where education and training becomes so incredibly significant. It’s all about learning what your tools can do and how to use them to suit you. Have you ever had to replace pickets in your wooden fence? Did TheNicheReport.com
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you use a hammer and nail, or a nail gun? The tool you use can make the difference between a weekend job and an afternoon project. The same holds true for your business. If you are only using your LOS to run credit on a 1003 that was dropped in from your website, you are missing out on the glorious effectiveness that full functionality can bring you. Think about the features that are available to you that you may not already be using: • Marketing • Document Storage (lender specific stacking orders and more) • Create and use pre-populated templates • Order services without rekeying data o Flood certifications o HMDA • Real-time pipeline status reports • RESPA packages • Track Disclosures • APR tolerance checks Your LOS has the capability to do so much more than you give it credit—and it can help you sail through compliance audits every year. Everything you need is at
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your fingertips, but it could be slipping right through the cracks.
It’s about knowing what you can do In any profession, education is a crucial ongoing process. If we are not learning, we are not moving forward. Requiring training and certification for mortgage professionals, while cumbersome, is an important step in professionalizing the industry, and your business. Learning and understanding the functions of your mortgage platform is so important to the success of business. It can streamline your processes, speed up your closing time, and make impatient clients happy again. Make sure you take the time up front to learn your software. With so many features and functions of your loan platform, you can learn something new that you can use every day. And much of the training is free. It’s never too late to keep learning. The advanced technology that you need for your business can leave you behind if you let it, but if you use it to your advantage, the possibilities are endless. B.J. Bounds is the Sr. Marketing Communications Specialist for Calyx Software. In addition to media relations and copywriting, Bounds is a contributing author to the Calyx Software blog, CalyxCorner. She has over 10 years experience in sales and corporate marketing with a focus on technology that spans several industries. For more information on Calyx Software, contact 800-362-2599 or visit www.calyxsoftware.com or www.calyxcorner.com.
Man on the hill
David v. Goliath Part II by marc savitt
M
arch 7, 2011. The day began with a press release, “NAIHP files suit over Loan Originator Compensation Rule.” Almost immediately, my phone starting ringing and kept ringing all day long. Most called to express relief that our industry was finally starting to fight back. Others wanted to know what our chances were for stopping the rule. One obviously depressed broker told me, “we didn’t stand a chance of beating the Fed in court,” because as he saw it, the Federal Reserve Board was Goliath and originators were the David’s of the world. I immediately reminded this caller that David prevailed in that battle. By the time this article is published, we will all know the outcome of the lawsuit. We have a strong case and should be granted our motion for a Temporary Restraining Order (TRO). What makes all the difference in these matters is the Judge assigned to the case. On a personal note, March 7th has always been a lucky day for my family. On March 7, 1942, my father
enlisted in the U.S. Army and survived 3 ½ years in the jungles of the South Pacific. On March 7, 2000, my son enlisted in the U.S. Air Force and survived a long tour of duty in Iraq. Filing our suit against the Fed was not planned for March 7th, it just happened to be the day everything was ready. Hopefully, the tradition will continue and we’ll win this war too. Make no mistake about it, we are engaged in a war with the very individuals sworn to protect us; our own government. For the past 19 years, mortgage brokers and originators have been punished with excessive rules and regulations, based on antidotal evidence and without the benefit of a fair trial. In 1992, HUD required brokers to disclose yield spread premiums. Although, this was unfair to our industry, anti-competitive and created confusion for consumers, we complied. Even with full disclosure, we are still accused to this day of taking kickbacks and bribes. We have survived numerous attempts to ban or restrict YSP over the years. Some were achieved by intense lobbying and grassroots efforts, while others were by the luck of Congressional time clocks running out. When Barney Frank became Chairman of the House TheNicheReport.com
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man on the hill Financial Services Committee, the attacks intensified. Just a few years ago, Chairman Frank was successful in the passage of two bills (from the House), which once again singled out mortgage brokers. Luckily, these bills were never brought up in the Senate, so they died, along with the end of the associated Congressional terms. A few months ago, NAIHP discovered an important element concerning the compensation rule. During a meeting between former HFSC Chairman Barney Frank and NAIHP’s Government Affairs Team, about the unintended consequences of the Fed’s rule, Mr. Frank freely admitted, “We told the Fed to do it.” Perhaps, Mr. Frank believed agency rulemaking was his only hope of achieving reform. This is just speculation on our part. However, what we do know is, Barney Frank admitted to using his influence on the Fed. As we all know now, he never had anything to worry about, because Wall Street reform finally became law on July 21, 2010. I’m still not sure why they called it “Wall Street Reform.” NAIHP v. Board of Governors of the Federal Reserve System was a long time in the making. Although, we always suspected legal action might be our only recourse, it was not until late October 2010 that we started searching for legal representation. In November, we chose the firm of Howrey and began putting our case together. Lawsuits are not born overnight, as evidenced by this action. We fully understood the stress and frustration the industry felt, but we resisted filing too soon. We spent over three months putting our case together, while we pursued other options for halting implementation of this rule. NAIHP held numerous meetings with Congressional leaders on both sides of the aisle, as well as meetings with Elizabeth Warren (Special Assistant to the President),
HUD, Treasury, the Consumer Financial Protection Bureau, Conference of State Bank Supervisors, National Council of State Housing Agencies, the Federal Reserve Board’s Consumer and Community Affairs Division, SBA Office of Advocacy, the Inspector General’s Office of the Federal Reserve Board, House Financial Services Committee and the Executive Office of the President. As President of NAIHP, I want to express my appreciation to all those who have helped us during this long campaign. This was truly a team effort, which involved volunteers from around the country. It would be impossible to mention everyone’s name, but some deserve special recognition. They are, Ian Coates, Fred Glick, Brain Benjamin, Bill Kidwell, Gina McLemore, Susan Lipston, Cheryl Savitt, Penny Fagan, Scott Stingley, Brian Stevens and Frank Garay. I apologize in advance, if I missed anyone. So, on this March 7th, as we await a hearing date for granting our motion of a Temporary Restraining Order, we hope the second battle of David v. Goliath; will be as successful as the first.
Marc is the President of the National Association of Independent Housing Professionals. Previously, he served as the 2008-2009 President of the National Association of Mortgage Brokers. He also held the positions of NAMB's President-elect, Vice President, Director, Chairman and Founder of the Consumer Protection Committee and was awarded NAMB's highest honor, Broker of the Year.
Appraiser sound off
Shrinking Appraiser Numbers? by Lamarr Banks
S
ince HVCC and now Fannie Mae/Freddie Mac continuing basically the same guidelines, the State of California has seen a severe drop in the number of licensed appraisers. The numbers will be broken down by licensing level, area and then localization of the southern California area. The total number of appraisers prior to 2006 for the State of California was approximately 24,000 (this is an approximation based on old data). The current numbers are lower. Keep in mind that in the State of California, only Certified (AR) or Commercial (AG) appraisers can submit accepted work. Licensed (AL) and Trainee appraisers (AT) cannot sign off on appraisals themselves. AL's and AT's now require the signature of an AR or AG. However, many AR’s and AGs do not wish to sign for AL’s and AT’s while lenders and banks will not accept appraisals with AL's and AT's signatures on them. What this all means is that the number of appraisers within the state of California who can actually perform work for lenders and banks are based solely on the number of AR's and AG's. All data provided by www.orea.ca.gov
Total number of Appraisers for the state of California: 13,791 (down approximately 10,000) Each level: AT-1305, AL-2693, AR-6375, AG-3418 Based on these numbers, only 9,793 can actually perform appraisals. Now let’s look at only the active AR and AG licenses for the southern California area: Los Angeles:
Riverside
San Diego
Orange
San Bernardino
AR-1148
AR-378
AR-589
AR-824
AR-12
AG- 680
AG-113
AG-273
AG-460
AG-Zero
The total number of active licensed AR and AG appraisers for the southern California area is 4,477. What is important to note is that the number of AL’s is most likely to shrink, due to upgraded requirements to achieve the level of AR. In addition to this, what also may be considered a “blind” number is how many AR’s will actually renew their licenses. At the time of me writing this column, there are 2,483 licensed active AR appraisers in the listed five counties. One can look at these numbers two ways. First, and on a positive note, AR’s will be very busy once the market TheNicheReport.com
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Appraiser sound off
Standing strong
picks up. The demand to keep up with the workload should be tremendous. Second, the negative side of these numbers is they will continue to shrink. Why? AG’s (commercial appraisers) main line of work is not single family residential appraisal work. The AL’s on average will need 2,000 more hours, additional college education and to be signed off by an AR or AG in order to apply for their AR designation. And if AR’s and AGs are busy performing appraisals, who will have time to sign off on them? The next two to three years should reveal answers to these questions, as well as many that have been raised in your mind. Once (and if ) the market picks up this year, many appraisers will be busy handling the work load. But how many of us will stay licensed and continue to work as appraisers? This will remain to be seen.
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Lamarr Banks is an alumni of the Delta Chi Fraternity of Cal State Fullerton, President of the Black Business Network of Orange County, a member of the City of Orange Chamber of Commerce, a former Ambassador for the Chamber of Orange, former President of the Orange Chamber Ambassadors, Ambassador of the year for the Chamber of Orange 2007 and a member of the Orange Chamber of Commerce Executive Board. Lamarr has been in the Real Estate Appraisal business since June of 2001. During the Real Estate boom years, Lamarr covered most of the greater southern California area. Lamarr is currently licensed at the Certification level and is approved to do FHA appraisals. Lamarr may be reached at lamarr@getimpact.net.
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Center sTage
Center stage with TMS funding
The Niche Report talks with Lisa Schreiber, Executive Vice President of Wholesale Lending at TMS Funding by the niche report
TMS Funding is the wholesale residential lending channel of Total Mortgage Services, LLC, an expanding mortgage banker based in Milford, CT. In February 2010, Total Mortgage launched TMS Funding to complement the Company’s successful retail lending platform and offer mortgage brokers and borrowers better service, choice, knowledge and efficiency in the mortgage lending process. In January 2011, industry leader Lisa Schreiber joined TMS Funding to lead and focus the team on growing the wholesale channel into a national platform. In early March 2011, The Niche Report interviewed Lisa Schreiber, EVP Wholesale Lending at TMS Funding. Lisa, let’s get right to it, with wholesale being only about 15% of the overall market now, why wholesale, why now?
We see a tremendous opportunity in the wholesale channel today as many lenders have exited and the remaining lenders are not providing real value either from a rate perspective or service levels. Through our centralized model we believe TMS Funding can quickly become an important resource for the mortgage broker community and help
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them meet their client’s needs. There are still many credible and knowledgeable mortgage brokers that are committed to doing the right thing, day in and day out, to help local borrowers find the most suitable mortgage at the most competitive rate. These are the mortgage brokers that TMS Funding wants to partner with on an ongoing basis. THE NICHE REPORT: Since you will be leading TMS Funding day to day operations, what will be its business model?
As you know the majority of my experience is in the wholesale channel with such companies as American Brokers Conduit and Bank of America. Our plan is simple; easy to use technology that brings current best practices such as a paperless environment and a product/pricing engine, consistently good pricing and knowledgeable AE’s and staff that can attract the highest quality brokers to become our partners. Just like Total Mortgage’s retail channel, TMS Funding will operate through a centralized model in order to improve the consistency and quality of the broker experience and reduce the wholesale platform’s risk profile. We believe we can really make an impact with mortgage brokers and their clients by delivering on our value
Center sTage propositions, as we know that the biggest differentiator between mediocrity and being great is the ability to implement the strategies you design! Will you be utilizing any new technology for the wholesale channel?
Technology has been extremely important to our parent Total Mortgage and will play an even more important role for us at TMS Funding. We have just made a significant investment in a new LOS and broker portal that has just enough of what the broker needs without being too cumbersome. In addition to many other benefits, this new LOS has superior fraud detection tools, which will help prevent problem loans from clogging up our pipeline and tying up our resources. This enables us to originate loans with greater efficiency, and ultimately creates more savings opportunities for our customers. THE NICHE REPORT: With TMS Funding commitment to the wholesale channel, I assume you do not believe the mortgage broker is going away?
The mortgage broker plays a very important role in providing borrowers access to some of the lowest rates and product options available in the industry. They need to be part of the solution for borrowers. Without the mortgage broker, most of the competition will go away and consumers will be left with only a few choices that won't have any motivation to provide competitive rates and services. But to be part of the future of the industry or partner with TMS Funding mortgage brokers need to be committed to extensive product knowledge, ethical behavior, and the highest levels of customer service. THE NICHE REPORT: Can you give us a quick overview of Total Mortgage as the parent of TMS Funding?
Total Mortgage Services was founded in May of 1997 with a customer-centric approach from day one and a mission of responsible lending. Total Mortgage has always, and will continue to focus on working with the high-end credit borrower, giving them personalized service and the most competitive mortgage rates. Total Mortgage compares its model to Wal-Mart’s model, offering significant value to clients’ everyday by combining low rates and great service. Because of its centralized model Total Mortgage is able to offer borrowers tangible value in both cost and time savings. They have centralized both their origination platform and operational infrastructure in Milford, CT. This strategy has enabled
Total Mortgage to deliver one of the most efficient end-toend lending operations that can optimize the lending value chain and mitigate risk throughout the organization. The model also creates significant cost savings that is passed on to clients in the form of low current mortgage rates and fast turn times. These benefits will play a big part in TMS Funding’s ability to deliver the same exceptional pricing and service to our mortgage broker partners. What is TMS Funding’s current product offering?
We offer agency conforming and high balance, FHA conforming and high balance loan amounts, both fixed and ARMs. We are also moving towards approval for USDA and are always looking for competitive jumbo outlets. Our goal is to be able to offer the best of the current product availability so we give our mortgage broker partners product choice as well as continue to pursue high quality originations. Where is TMS Funding doing business today and what are your future expansion plans?
We are currently licensed in 19 states: California, Connecticut, Delaware, Florida, Georgia, Illinois, Massachusetts, Maryland, Michigan, North Carolina, New Jersey, New Hampshire, New York, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, and Virginia. We currently have 10 Account Executives in CT, NY, NJ, VA, MD and FL. We are looking to grow to 35-40 reps by year end and have representatives that cover the current geographic region plus those additional states we enter into in 2011 and beyond. Thank you for taking the time to speak with us today. Please keep us posted on future developments at TMS Funding so we can keep our readers informed. I would also recommend that mortgage brokers visit TMS Funding’s website at http:// www.tmsfunding.com or call 1-888-371-2989 to get more information.
Tip of the Month Going Through Hell and Stopped?
by Stewart Mednick
M
y dad was a very wise man; with practical logic. He was a pharmacist by trade, but always seemed to have a saying that applied to any given situation regardless of his profession. That is how I remember him, and he died over 30 years ago. Sometimes, the thoughts we hold dear are skewed over time. Sooner or later, we catch this. So we shift and reset; and rest our opinion/attitude/goals to what we feel they should be … or should have been originally. Now, my dad, I am sure had a saying for what to do when everything is going wrong. I just can not remember it. I am sure he had a saying for what to do when I needed motivation; I just can not remember it. I am sure he had a saying for…. As life progresses, I have picked up a few lil’ buttes of my own. One that I have particularly favored is a saying a friend had posted on his emails, and later has been known to pop-up in song lyrics: “If you are going through Hell,
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just keep going.” At first, it made no sense to me. Why keep going, you are in Hell, that sucks! Like being in a pot of soup with no spoon. But I finally figured it out: if you stop, you stay in Hell. But, if you keep pushing through it, you will eventually leave…kind of like driving through South Dakota. It takes fortitude, persistence, motivation, and a lot of coffee and energy drinks. If you have a copilot or coach like a loving spouse, sig-other, or professional partner, then all the better. Too many times, we stop. We can not ‘bewitchedourselves’ out of a jam by wiggling our nose. We can not call, “time out!” and then “time in!” when we fix everything to how we want to restart. We definitely can not call for a ‘re-do’ or ‘do-over’ when things suck, and we want to start over. This is not a video game. This is not a practice run. Hell happens. Life happens. The sun will rise and the national debt will increase. Through it all, we need to just keep going. Tragedy is defined, by me, as a prolonged stop in Hell. No motivation, no incentives, no energy. Dead in your tracks and the final resting place. Hell is anything we
want it to be. Hell is a bad marriage. Hell is a dead end career. Hell is an unexpected illness. Hell is a job you love, but in an industry that is relentlessly unforgiving in return. DON’T STOP! Eventually you will see the Montana border and everything is good, and the effort; the pain; the emotional strain is a memory. The reward is immeasurable. When confronted with an overbearing task and I felt overwhelmed, my dad would ask, “how do you eat a whale?” I would reply, “one bite at a time.” My dad would not define success by learning to ride a bike, but by getting back on after every time I fell. My dad had a few good ones that I remember. He never addressed Hell ... and he never will. Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at 651-895-5122 or smednick1@netzero.net
WHAT IS YOUR MORTGAGE IQ?
What's your mortgage IQ? BY MortgageCurrentcy
Loan Officer Compensation Rules are on everybody’s brain this day. And the way it’s shaking out is that the loan officers with the most volume will be the winners. So, it “pays” to ask questions to see if the loan has a snowball’s chance of getting approved BEFORE you add it to your pipeline. Fannie: Removal of Borrower from Loan: I have three borrowers on a mortgage, who want to refinance and remove one of them using DU Refi Plus. The underwriter says the only way borrowers cannot be removed unless it is a divorce or death. I disagree. What’s the rule? The underwriter is not correct and a borrower can be removed based on Fannie’s B5-5.1-05 DU Refi Plus and Refi Plus Eligibility (3-29-10) DU Refi Plus – Borrower May Be Removed if… • If payment is same (or decreasing) borrower may have no more than 1X 30-day late mortgage payment within the last 12 months. • If payment is increasing, borrower may not have ANY late mortgage payments within the last 30 days • 12-month loan servicing history from lender must be part of the loan file • Seasoning – 12 months as 12-month pay history has to be documented • Proof that past 12-months mortgage payments have
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• •
been paid from his or her own funds (meaning the borrower(s) who will remain on the loan) The borrower being removed is also removed from the deed If borrower is being removed due to death, a 12-month pay history is not required. However, evidence of deceased borrower’s death must be provided.
Refi Plus – Borrower May Be Removed If… • If payment is same (or decreasing) borrower may have no more than 1X 30-day late mortgage payment within the last 12 months. • If payment is increasing, borrower may not have ANY late mortgage payments within the last 30 days • 12-month loan servicing history from lender must be part of the loan file • Seasoning – 12 months as 12-month pay history has to be documented • Proof that past 12-months mortgage payments have been paid from his or her own funds (meaning the borrower(s) who will remain on the loan) • The borrower being removed is also removed from the deed • If borrower is being removed due to death, a 12-month pay history is not required. However, evidence of deceased borrower’s death must be
WHAT IS YOUR MORTGAGE IQ?
•
provided. A new borrower may be added provided existing borrowers remain on the loan
Fannie: Payment Made by 3rd Party: A church is paying a pastor’s car payment, but the car loan is in my client’s name. I have provided the copies of cancelled checks but the underwriter is still counting the payment. What’s the rule? Basically, the only time you can ignore a debt by proving a 12 month payment history by a third party is the following -Co-Signer of that debt, Self-employed borrower and the business pays debt, or court ordered (no payment history required) -these provisions are from Fannie. ( Chapter B3-6) Here is how it would be underwritten with the current rules Since the car loan is paid by his employer, it would be considered an auto allowance -- 2 yr. history is required or this is just a compensating factor allowing a higher qualifying ratio. If the borrower files a Schedule C or IRS Form 2106, you must use the Actual Cash Flow approach or use the Income and Debt approach. • Actual cash flow approach: If the borrower reports automobile allowances on IRS Form 2106 or IRS Form 1040, Schedule C: – Funds in excess of the borrower’s monthly expenditures are added to the borrower’s monthly income. – Expenses in excess of the monthly allowance are included in the borrower’s total monthly obligations. If the borrower used IRS Form 2016 and recognized “actual expenses” instead of the “standard mileage rate,” the lender must look at the “actual expenses” section to identify the borrower’s actual lease payments and make appropriate adjustments. Income and debt approach: If the borrower does not report the allowance on either Form 2106 or Schedule C, the full amount of the allowance is added to the borrower’s monthly income, and the full amount of the lease or financing expenditure for the automobile is added to the borrower’s total monthly obligations. While your scenario is common--unfortunately, common sense is hard to come by these days -- everyone is having to deal with Fannie forcing loan repurchases for technicalities just like the scenario you present. USDA: Manufactured Homes – Can we do a loan on a Manufactured home USDA or FHA property dated prior to 1997? Here are RD MANUFACTURED HOMES requirements: • Existing manufactured homes are not permitted, unless it is already financed with a Section 502 RH Direct or Guaranteed loan, is being sold from RD inventory, or is being sold from a Lender’s inventory
provided the Lender acquired possession of the unit through a loan guaranteed by RD. • “Manufactured” vs. “Modular.” There are no restrictions on a modular home, even though they are built off-site. Modula’s must meet all the same requirements as “stick built” homes. • New manufactured homes must be purchased from an Agency approved “dealer-contractor.” The list of currently approved dealer-contractors can be obtained from the RD Area Office. FHA requires that a manufactured home be built after June 15, 1976. FHA: Hook Up to Public Utilities: The FHA appraisal on my loan file says that my property is currently on a septic system but that a public sewer system is available for hookup. Does the seller HAVE to connect the home to this system for a FHA loan? Maybe. It all boils down to one magic word. Feasibility. FHA requires connection to public water and sewer if it is "feasible" to do so. What few people know is how FHA actually defines the "feasibility" of the connection option. In the HUD Single Family Housing HOC Reference Guide it explains the benchmark for feasibility: Chapter 1-20B (Sewer Systems) 1. Individual sewage systems may be acceptable when the cost to connect to a public or community sewage system is not reasonable as defined by the lender. a) 3 percent or less of the estimated value of the property is the suggested benchmark. b) The lender is responsible for determining if connection is feasible. Chapter 1-21b (Individual Water Systems) B: Individual water supply systems (wells) may be acceptable when the cost to connect to a public or community water system is not reasonable as defined by the lender. 3 percent or less of the estimated value of the property is the suggested benchmark. C: The lender is responsible for determining if connection is feasible. This is little known information that will be great to share with your Realtors. Email Karen@Mortgagecurrentcy.com with your contact info and we will forward you a free copy of the Mortgage Talking Points® “FHA Hooking Up to Private Septic & Well: Making the Connection—Feasibility Defined!
Written and contributed by Karen Deis of Mortgagecurrentcy. com. Provided monthly by www.MortgageCurrentcy.com – Interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/managers. Mortgage Talking Points TM, charts and checklists included. TheNicheReport.com
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NICHE REPORTS
Agency & FHA 360 Mortgage Group 866-418-2997
NEW
AgFirst Farm Credit Bank
Conv, FHA, VA and portfolio products. To become an approved broker or to view a rate sheet, visit our website www.360mortgagegroup.com. Mortgage Lending for the Homeowner living in Rural America.
800-858-4651
Axis Capital Group Inc.
Specializing in FHA,203k, Reverse. AZ,CA,CO,FL,HI,TX,WA.
888-229-4773
NEW
Bank of Internet
Jumbo and Super Jumbo Loans 5/1 - 7/1 and 10/1 options.
888-833-0555 ext 1508
Icon Residential www.iconwholesale.com
National Wholesale Lender offering a full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus.
HARD MONEY & NON-PRIME GreenLake Real Estate Fund, LLC 310-462-4637
Manaseh, Epharim & Associates 770-840-0112
Windvest Corporation 877-285-0777
Private direct commercial loans in CA and NV. All property types except raw land. Our latest fund was raised specifically for loans in this tough economy. We're eager to lend, so please call today! Direct Lender with fast closings. Your source for international and domestic funding. Specializing in Investor Loans & Rehabs, Income Property, Rentals, Probate, Cash Out Refis and now doing Owner Occ throughout CA. Direct lender offering generous broker commissions. Fast and Friendly service since 1994. We offer same day approvals and 7 day closings. Call us today or visit us online www.windvestcorp.com.
Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.
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April 2011
NICHE REPORTS
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Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lender’s information on products, program, procedures, representations, and warranties for details.
TheNicheReport.com
49
Service provider classifieds
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April 2011
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MortgageCurrentcy.com 800-231-4787
AllRegs Academy offers online, audio and classroom training, continuing education, certifications, study guides, practical guides and customized training at your site on compliance, underwriting, servicing, FHA, VA, SAFE and more. Interpreting the complicated mortgage rules in plain language (Fannie, Freddie, FHA, VA, Compliance, Credit) that ONLY affect the loan origination side of the business. Help Desk. Rule Change Calendar. Automatic Face Book posts & Mortgage Talking Points™ for your real estate agents. Online e-zine published 2X month. Try for $1.
marketing & lead Gen Financial Lead Services 877-290-7903
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Exclusive Direct Mail Transfers $225,000 average loan size. 640+ FICO, NO BK's, No Lates, Seeking Refinance. FHA/ VA Streamline, Reverse, Purchase, A+ Conforming/ Jumbo, Debt Consolidation. Every lead meets your criteria. Delivering complete marketing education, valuable products to grow your business and exceptional service to make marketing an easy, enjoyable, and profitable experience. We provide full service automated marketing plans to fit your budget and business goals incorporating postcards, newsletters, greeting cards, brochures, presentations and more! Marketing consultations are available to help strategize the best marketing plan for your individual needs, whether just starting a marketing campaign, or enhancing your current plan. Imagine having 50 prospects per loan officer that are already pre-approved calling you within 10 days from today! Our mailers are FICO and AVM based and are pre-qualified based on credit data. Prospects will be ready to finance when they call you! The ultimate contact management system for LOs. Increase your performance with automated marketing and alerts. Sync correspondence from Outlook and mobile devices to one centralized location to track contacts, leads, loan activity and referrals. Not just mortgage flyers and open house flyers, we are a powerful financial analysis tool for refinance and purchase, greatly helping loan originators.
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Start your own credit repair company with our state of the art tracking software and dispute outsourcing options. Top notch support by a dedicated Account Expert.
Warehouse Line NEW
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NoOverlays.com is focused on providing warehouse line liquidity to Mortgage Lenders, Correspondents, Banks and Credit Unions.
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51
Service provider classifieds
Compliance & Audit Accurate Quality Control, Inc. 770-931-5999 Adfitech Inc. 800-880-0456 Waquis 310-696-9515
Quality Control, Training, Consulting. Post Closing, Suspected Fraud, Early Default & Repurchase Reviews, Pre-Funding, Test Cases. 49 Combined Years Working for HUD. We do the right thing right! GIVE US A TRY: 2 FREE QC REVIEWS (new clients only)! ADFITECH, has served the Residential Mortgage Industry since 1983, providing Post Closing QC Audits, Due Diligence Reviews, Pre-Funding QC, Default Reviews, Fraud Investigations, Post Closing Fulfillment, and LOANVAULT速 Imaging, of Conventional & FHA products. Clients include Community Banks, Credit Unions, Mortgage Bankers, MI Companies, and Wall Street Investors. We provide HUD Auditing and QC on every loan type.
Branch Opportunities NEW
52
AgFirst Farm Credit Bank 800-858-4651
Mortgage Lending for the Homeowner living in Rural America.
American Pacific Mortgage 866-625-9352
Join American Pacific Mortgage and become a direct lender with the option of brokering.
Benchmark 972-398-7676
A community of mortgage professionals united by Benchmark core values Relationships, Success, Dynamic, Excellence, and a Positive Attitude specializing in retail branching throughout the United States.
Guaranteed Home Mortgage Co. Inc. 888-572-3602
Specialized Retail Platform for Experienced Loan Officers.
Land Home Financial branchsales@lhfinancial.com
Direct Lender that has been in business for over 22 years. We have prospered and grown in a climate of turbulence and change. We have adapted and helped our branches adjust to the new rules and regulations that have occurred over the last few years and helped them take control of their future in today's mortgage industry.
Perfect Net Branch 877-282-4577
Tax Resolution, Debt Settlement, Debt Management, Bankruptcy branch opportunity. Monetize every lead and marketing dollar with a full suite of financial services. PNB is committed to providing you with faster results and a greater opportunity.
Sierra Pacific Mortgage 800-447-3386
Retail Branches and Wholesale Lending Nationwide. Privately owned specializing in residential conforming, FHA, VA and Jumbo. Wholesale: www.spm1.com Retail: www.spmloans.com.
Top Flite Financial, Inc. 866-301-0653
National Mortgage Banker - Now hiring experienced Branch Managers with a proven track record. We have answers to the new compensation questions!
April 2011
LENDER & RESOURCE DIRECTORY
360 Mortgage Group National Wholesale Mortgage Lender 360mortgagegroup.com 866-418-2997
The 504 Road Specializing in SBA 504 & 7(a) Loans www.the504road.com Ken Patterson 559-221-4910 ken@the504road.com
Accurate Quality Control www.AccurateQC.com Genny Kelly or Judy Nash-Ellis 770-931-5999 GennyK@AccurateQC.net or JudyN@AccurateQC.net
Adfitech Provides Residential Mortgage Post Closing QC, Due Diligence Reviews, PreFunding QC, Default Reviews, Fraud Investigations, Post Closing Fulfillment, and LOANVAULT Imaging of Conventional & FHA Products. www.adfitech.com John Rosenhamer 800-880-0456 sales@adfitech.com
AgFirst Correspondent Lending Mortgage Lending for the Homeowner living in Rural America. www.agfirstmortgageloans.com Janice Buchanan 803-753-2420 jbuchanan@agfirst.com
a la mode, inc. Websites and marketing tools for real estate professionals. www.alamode.com 1-800-ALAMODE info@alamode.com
AllRegs Leading information provider for the mortgage industry. www.allregs.com 800-848-4904 help@allregs.com
ATTENTION LENDERS!! Buyers of Distressed Debt. NicheBuyers@gmail.com
Axis Capital Group Inc. Specializing in FHA,203k, Reverse. AZ,CA,CO,FL,HI,TX,WA. AxisCapitalGroupInc.Com Sergio Gonzalez 888-229-4773 sergio@axiscapitalgroupinc.com
Bank of Internet www.bofilendingpartners.com Darin Judis 888-833-0555 x1508 Darin.Judis@bankofinternet.com
American Pacific Mortgage Corporation One of the largest independent retail banking and branching companies in the country. www.apmortgage.com Melissa Arntzen 866-625-9352 info@apmortgage.com
Benchmark A community of mortgage professionals united by Benchmark core values Relationships, Success, Dynamic, Excellence, and a Positive Attitude specializing in retail branching throughout the United States. www.iambenchmark.info Karri Vaught 972-398-7635 contact@iambenchmark.info
Applied Business Software Origination and Servicing software for hard money lenders. www.TheMortgageOffice.com 800-833-3343 leadsmanagement@absnetwork.com
Bismark Mortgage Company Residential Construction Loans. www.bismarkmortgage.com James Minarsich 800-350-7199 x106 loans@bismarkmortgage.com
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53
LENDER & RESOURCE DIRECTORY
DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges. www.docmagic.com 800-649-1362
ENTITLE DIRECT Savings up to 35% or more on title insurance in 30 states. www.EntitleDirect.com/mortgage 877-936-8485 or 877-9ENTITLE SpecialistCenter@EntitleDirect.com
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Guaranteed Home Mortgage Company, Inc. Established and well-funded Mortgage Banker since 1992. www.ghmc.com and www.joinguaranteed.com Kelley Berkheiser or Louis Tesoriero 888-329-GHMC ltesoriero@ghmc.com
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April 2011
HTDI Financial Provides credit repair business options to increase revenue. www.outsourcedisputes.com 877-877-4834 opt 6 sales@htdifinancial.com
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Land Home Financial Services, Inc. Our branches enjoy the satisfaction of being entrepreneurs while reaping the benefits of a wide array of services and support. www.lhbranch.com branchsales@lhfinancial.com
Linear Title & Closing Title Insurance & Settlement Services www.lineartitle.com Nick Liuzza 401-841-9991 nliuzza@lineartitle.com
Mailer Leads Lenders and Brokers who use our mailers are not only surviving -- they are thriving. www.MailerLeads.com 866-783-4053 ext 14
Manaseh, Epharim & Associates Domestic and international financier, offer up to 100% financing to qualified investors/borrowers www.meandassociates.com R.D. Walker info@meandassociates.com 770-840-0112
MortgageCurrentcy.com Interpreting the complicated mortgage rules in plain language. 800-231-4787
The Mortgage Lender Implode-O-Meter Tracking the Housing Finance Breakdown... the WHOLE truth. www.ml-implode.com
Mortgage Insurance Agency, Ltd. State Licensed Surety Bonds, Errors & Omissions, and Fidelity Bond coverages for Mortgage Bankers and Mortgage Brokers nationally. www.mtgins.com David Jackson, President 866-355-9944 info@mtgins.com
LENDER & RESOURCE DIRECTORY
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National Valuation Service, Inc Comprised of thousands of fully vetted Independent Business Owners who as Appraisers, provide valuation and consulting services in 50 states. 786-581-9171 info@nvs.coop
NoOverlays.com #1 Resource for Mortgage Banker, Bank & Credit Union Liquidity www.NoOverlays.com 855-NO-OVERLAY hq@nooverlays.com
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Perfect Net Branch Tax Resolution, Debt Settlement, Debt Management, Bankruptcy www.perfectnetbranch.com Terry Wilson 877-282-4577 terry@perfectnetbranch.com
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Sierra Pacific Mortgage Retail Branches and Wholesale Lending Nationwide. 800-447-3386 info@spm1.com
StreetLinks Lender Solutions Providing lenders with a suite of valuation services and robust lending technology solutions, including full-service & selfmanaged appraisal products www.streetlinks.com 800-778-4788 sales@streetlinks.com
Top Flite Financial, Inc. National Mortgage Banker - Now hiring experienced Branch Managers with a proven track record. We have answers to the new compensation questions! www.tffinc.net Timothy G. Baise, CMC 866-301-0653 tbaise@tffinc.net
Waquis We provide HUD Auditing and QC on every loan type. www.waquis.com/qc Joe O'Neill 310-696-9515 joe@waquis.com
Windvest Corporation Hard money lender, specializing in Rehab Loans. www.windvestcorp.com Andre Jimenez John Ermin 877-285-0777 andre@windvestcorp.com john@windvestcorp.com
TheNicheReport.com
55
BRINGING UP THE REAR - continued from page 58
that TARP. I wonder what that job is like, managing a fund that no one reports on, asks about, or even knows where was spent. When Herb announced he was stepping down last fall to return to his home in Connecticut, Herb said that TARP, or the Troubled Asset Relief Program for long, was a proven success… and I see no basis upon to which to challenge that statement, since we’re not allowed to know where it went or for what it was used. He also said that the bailout fund stabilized the nation’s financial system and laid the groundwork for an economic recovery. Um… well, okay… if you say so. Just writing down all the things that Herb did in his career makes me tired, so it’s easy to imagine that he needed a break, so he bought a place in Connecticut… a cottage by the sea… just somewhere comfortable where he could put his feet up and relax… take stock… reflect on life’s accomplishments. So, he bought Phil Donahue’s and Marlo Thomas’ $25 million Greens Farms mansion. The estate is three separate lots which are a total of 7.7 acres. The home is a
7,379-sq.ft. 1911 wood and stucco Tudor with seventeen rooms, including nine bedrooms. There is also a guesthouse. Beautiful, don’t you think? Lovely, it really is just lovely. So, getting back to the point of this article… hey, what was the point of this article? Oh, yeah… I remember now… I was talking about how people that worked for the government didn’t used to make much money until perhaps they left their government jobs and went to work in the private sector. You see, it seems to me that our government has become increasingly out of touch with the rest of our society, especially lately, that is to say that the current administration appears to have no connection whatsoever with the American middle class, for example. The HAMP Disconnect Neil Barofsky, the SIGTARP, or Special Inspector for the Troubled Asset Relief Fund was fairly critical of the Home Affordable Modification Program over the last six months or so, right up until he resigned from his position a month or so ago. At one point last fall he made the observation that the
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BRINGING UP THE REAR administration had established “meaningless” goals for its “flagship mortgage assistance program.” He pointed out that when President Obama introduced the program in the latter part of February of 2009, he claimed that the program would help 3-4 million homeowners, but as it turns out, the program has at best helped… and I use the term “helped” very loosely… about 170,000 homeowners to-date. (This was back in September of 2010, today that number would be closing in on 600,000.) The administration’s response was… and I am not making this up, in fact I wrote about it at the time, that the plan’s goal wasn’t to actually help 3-4 millions of Americans, but rather merely to OFFER to help those millions. Like maybe a drive by offer and go, would suffice, I suppose.) Neil Barofsky replied by saying: “Defining success by how many offers are given can reasonably be perceived as essentially meaningless,” Instead, the program’s goal “must relate to how many people are helped to avoid foreclosure.” Enter Assistant Treasury Secretary Herbert Allison, just prior to his departure to that lovely cottage on the water in Connecticut. Herb responded to Barofsky’s report in a letter, saying that the statements about the plan’s goals “have not always been precise.” But he argued that “offers of help” is a meaningful measurement because some borrowers who don’t qualify for the government program will still be able to avoid foreclosure. Now, you see my point here, right? As Herb is making this inconceivably obtuse point, we as a nation are in the third full year of the foreclosure crisis, the byproduct of the worst economic meltdown in 70 years. Millions of Americans have already lost their homes to foreclosure, and all forecasts point to millions more certain to lose their homes in the next couple of years. Headline unemployment is hovering around 10%, and the administration is clearly scrambling to make the economic recovery take hold somewhere… anywhere. And Herb Allison, God bless him, is actually arguing that the “OFFER” of help is really what matters, as opposed to the “PROVIDING” of help to millions of American homeowners, as the program promised. Like, to Herb, when it comes to saving homes from foreclosure, the main thing is that we try, not that we succeed. Of course, Herb was spouting this insensitive drivel a month or so before he was going to retire to his 7,379-sq. ft. 1911 wood and stucco $25 million Greens Farms Tudor mansion with seventeen rooms, including nine bedrooms
on 7.7 acres… with the guest house… that used to belong to Phil Donahue and Marlo Thomas. Are you feeling me here? See… because in the old days, our public servants, those that worked for the government, seemed to make less money than Phil Donahue or Marlo Thomas. They didn’t used to have 7,379-sq.ft. 1911 wood and stucco $25 million Greens Farms Tudor mansions with seventeen rooms, and nine bedrooms on 7.7 acres… with guest houses. And they used to seem more like the rest of us… more in touch with the lives of middle class Americans. Maybe, if that were the case again, if our public servants weren’t so far removed monetarily from the rest of us, maybe they would see the problems we’re facing with more clarity, and take them more seriously. For instance, maybe HAMP would have worked better than it did… maybe the foreclosure crisis would have ended by now, you know… if Herb wasn’t a zillionaire who lived in a $25 million mansion. And, maybe Herb is being sincere when he says that trying is as important as succeeding… that offering is as important as providing… because none of it will ever come close to affecting him personally. Herb, I’m fairly certain, isn’t going to lose his $25 million 7,379-sq.ft. Tudor mansion to foreclosure, in fact, my guess would be that he’s never going to know anyone in that predicament either. So, “we tried”… might just be as good as we get from this government. Maybe Herb feels the same way about HAMP’s underwhelming performance as the rest of us might feel if the capital gains or inheritance tax were to double or even triple next year. Like, we might say, oh well… we tried… and isn’t “trying” what really matters? The important thing was that we OFFERED to keep the capital gains tax the same… we “TRIED” to keep it the same… and that’s how we measure the success of our efforts, as opposed to succeeding and actually keeping it the same. Like, we might one day say to them: Oh well, we tried and we offered… and that’s what was important about our efforts… your Capital Gains and inheritance tax rates have tripled though… so, sorry about that…
Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters and publishes a Monthly Museletter. Send your responses to Martin@TheNicheReport.com. TheNicheReport.com
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BRINGING UP THE REAR
Bringing Up the rear Ex-Assistant Treasury Secretary Herb Allison and HAMP BY MARTIN ANDELMAN
R
emember years ago how people who worked for the federal government didn’t make a lot of money or, in general, have a lot of money? Like, they were public servants and only after someone left their government job, then he or she might get a job in the private sector and start making a few bucks. I remember those times. And I’m not at all sure when they ended, to tell you the truth, but they sure seem to have ended, and I’m starting to think that it’s affecting how things go in this country. Herb Allison, who was the Assistant Treasury Secretary under Geithner, and headed up the $700 billion TARP bailout fund, followed a slightly different path, and look what happened there. Herb started out with a B.A. in philosophy from Yale University, which is… oh, I don’t know… funny to me. A Yale philosophy major? Do they even have those there? Maybe it was the philosophy of money and he minored in inheritances? From there Herb did an MBA at Stanford, but big deal… I did my MBA at Pepperdine and I can barely balance my checkbook. Herb then spent 28 years at Merrill Lynch, including
a stint as Director of Human Resources, where I’m sure his background made him an excellent choice for explaining the company’s health plan to a bunch of financial advisors. And after that, he became National Finance Chair for John McCain’s first failed presidential campaign. Between 2003-2005, Herb somehow managed to become director of the New York Stock Exchange. Now, I don’t remember these being particularly challenging years at the NYSE, so the place probably pretty much ran itself, I would think, because overlapping with that responsibility, from 2002 to 2008, Herb was the shiz at TIAA-CREF. These were some very rough and tumble years for those in the financial services industry, so all in all… very nicely done there. And, to round it all out, Herb had a cup of coffee at the helm of Fannie Mae back in 2008. So, what else would you expect someone with that kind of resume to do next? Manage the $700 billion TARP bailout fund? Why, that’s right… that’s what I would have guessed too. You remember the TARP… the $700 billion fund that had absolutely no accountability built right into it? We gave the money out and weren’t even allowed to ask what anyone did with it. Certainly the least transparent tax-payer funded fund in the history of the world. Yep, - continued on page 56
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April 2011
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