Originate Report - August 2017

THE OFFICIAL MAGAZINE OF GERACI

AUGUST 2017

CONTAMINATED SUBJECT PROPERTY:

Should You Still Lend? p. 24

Drew Louis, Del Toro Loan Servicing www.originate.report 1

2 Originate Report | August 2017

ANTHONY GERACI CEO Anthony@Originate.Report

RUBY KEYS Marketing/Editorial Director Ruby@Originate.Report

Thank You.

ALICIA CARTER Marketing/Advertising Assistant Alicia@Originate.Report

PAM HUBER Graphic Artist pamhuberdesigns@gmail.com

CONTRIBUTORS Glen Berlo • Ruby Keys • Drew Louis Melissa Martorella • Bryan Redington Kasey R.J. Stevens

FOUNDING UNDERWRITERS

MARK HANF President, Pacific Private Money

DAVID OWEN

At Geraci, our goal is to provide you with valuable content that will help move, motivate, and empower your business. We started Originate Report to provide value to our clients and those in the real estate finance industry. As we proceed with our new journey as a media company, there are many valuable people who have helped make our dreams come true and we cannot thank them enough – a few are listed in this magazine.

With our Captivate conference about to launch as the third event in our three conference series, we want to thank the contributors of the magazine, sponsors of all of our events, our attendees, and everyone else involved in making our dreams become a reality. This is just the beginning. We hope the value you receive in this magazine and the editions going forward place a significant motivation in your life. All lead stories in our two editions thus far have changed my life and the way I view my future.

I hope these articles reach you and provide valuable insight as to any business or personal road bumps you may be going through.

We hope you enjoy!

CEO, A List Partners

Ruby Keys ORIGINATE ONLINE

Ruby Keys, Marketing Director

www.originate.report

GERACI ONLINE www.geracilawfirm.com For Advertising Submissions and Inquiries contact Submission@Originate.Report For article submissions, email Articles@Originate.Report

ORIGINATE MAILING ADDRESS Geraci LLP 90 Discovery Irvine, CA 92618 PHONE (949) 379-2600

www.originate.report 3

contents AUGUST 2017

12

8

Cover Story

Mid-Life Calmness

How 30 Years of Chaos Finally Led to Peace

By Drew Louis, Del Toro Loan Servicing

Features

Focus Your Marketing Efforts on What’s Important—Only What’s Important

12

By Ruby Keys, Geraci Law Firm

22

Meeting the New HMDA Reporting Requirements

By Bryan Redington, Esq., Geraci Law Firm

24

My Subject Property Has Been Contaminated Does That Mean I Shouldn’t Lend On It?

By Glen Berlo, eScreenLogic

26

8

Building a Strong Antitrust Compliance Program

By Melissa Martorella, Esq., Geraci Law Firm

Special Sections

6 Loan Home

16 Industry Spotlight

Dean Quiambao, Partner, Business Development, Armanino

18 Closing on Time, Every Time

24

22

Parts One & Two of a Six-Part Series

By Kasey R.J. Stevens, Top Division Escrow Inc.

28 Trend Alert: Blockchain and the Loan Process

How Blockchain Can Improve Mortgage Systems

By Originate Report Staff

30 Upcoming Events 4 Originate Report | August 2017

26

www.originate.report 5

LOAN HOME

Help Make Dreams Come True.

Are you a lender? Advertise with Originate Report’s Loan Home and be seen by 35,000 industry professionals each month.

Contact our Loan Home director at alicia@originate.report or (949)383-4788.

www.pacificprivatemoney.com loans@pacificprivatemoney.com (415) 883-2150

150K 5M

√

√

√

√

√

√

√ SFR 70/30

√

√

√

√

√

√

√

Direct Lender

JCAP Financial Group www.jcap.net info@jcap.net (949) 622-6199

250K 5M

√

Direct Lender

A List Partners Management, LLC

100K 50M √

Direct Lender

6 Originate Report | July August 2017 2017

√

√

√

√

√

√

√

√

√

√

√

√

√

70/2

√

√

√

√

√

√

√

√

√

√

√

√

California Properties, 1st & 2nd TD’s

√

√

√

√

√

* CA

√

√

√ EB-5 70/5

√

Direct lender against Texas Real Estate —EB-5 loans and projects in most states.

√

√

√

√

√

√

* TX

2017

www.alistpartners.com scott@alistpartners.com (512) 687-6263

* CA

* = states lending in

Pacific Private Money

Br

MI N

LENDER

IM U MA M L O XI MU AN $ Co M mm LO A e N Co rcia $ ns l

LOAN HOME

Do you want to find your loan a home?

That home can be found here, in these lenders.

TYPES OF PROPERTIES WE LEND TO

um e idg r e Co rpo ra Ac t ion s/ T qu is ru No ition sts/ s tes an Leg d D al Pu ev Enti rch ti elo as pm es Re ed en ts ha b Pu / Re rch mo de a led Bla se /R nk en et ov Se Loa ate co ns d nd Mo Jo int r V t ga Fo entu ges rei res gn N Ot he at io na r ls MA XL o Ch an-to urc -Va he lue s/ La (% Te nd ) m ple / MA (B X s/ Au are tom / Co Syn Term ag m (yr o me o Re tive s rci gues ) tai al/ l (S Lo h En t) ter ops/ tai St r Ga nm ip Ma s S en lls tat t ) ion Le s isu re Ho (Go sp ita lf Co Mi lity ( urse xe d- Hote s/ M ari ls) Re use sid Pro Indu na) en s p Ra tial er t ie trial Inv nc es s h tm Se es a en lf-s nd tor Fa t Pro pe ag rm Re rtie s sta e s ura Of nts f ic e

TYPES OF LOANS

www.originate.report 7

FEATURE STORY

Focus Your Marketing Efforts on What’s Important Only What’s Important

By Ruby Keys, Geraci Law Firm

8 Originate Report | August 2017

I

t’s all about the marketing, right? Every busi-

value than a loan lead. Sure, leads can convert to ap-

still requires your potential lead to open your letter

ciple. Whether you are selling a clothing line,

say with a referring realtor, adds more value to your

you to get your message out and reach a far greater

ness owner understands this underlying prinflower arrangements, or a service, like say,

mortgages – marketing is the key to your success.

The digital age has ushered in a wealth of marketing opportunities, but with it comes certain challenges.

For mortgage loan originators, digital marketing can be a daunting and sometimes frustrating endeavor. While some excel and relish the digital marketing space, most originators would rather be, well, originating.

Marketing requires some market savvy, a little bit

of imagination, and time and effort. Loan origi-

nators can probably think of better ways to spend

their time rather than creating a new marketing plan. However, developing a good mortgage mar-

plications and result in a closing, but a partnership, business in the long run.

Developing a good mortgage marketing campaign is worth the effort because marketing works. Not any marketing, but smart marketing. If you are going to spend time and resources on promoting yourself, stick to the techniques that are proven to work.

keting campaign is worth the effort because market-

Building professional relationships with builders,

If you are going to spend time and resources on

an excellent way to grow your business. Social me-

ing works. Not any marketing, but smart marketing. promoting yourself, stick to the techniques that are proven to work.

Getting Started

Before beginning a new digital marketing campaign, you need to change your way of thinking about lead

generation. Digital marketing is more about busi-

ness development rather than simply generating

accountants, realtors, business bankers and others is

dia platforms like Facebook and Twitter allow you

to stay in contact with your partners and take in interest in their business as well as personal lives.

It is always a good idea to seek opportunities where

both parties can benefit. Look for openings that will allow you to refer your clients to their businesses as well.

new mortgage leads.

Target Demographics

and to understand how the choices they make will

anything else. Know your target audience. Whom do

People go online looking to learn, to investigate,

affect them down the road. View your marketing

campaign as a way to engage an audience and familiarize them with your business. Social media is perfect for this type of communication and makes

it easy to get the word out and remind followers exactly what it is that you do. It does not always have to be about selling. Sometimes it is as simple as

reaching out with an interesting story or engaging article.

While reaching out to the public, keep your eye on the prize. Find referrals and focus on meeting other parties that can refer you new business. Facebook,

Google, and LinkedIn all have groups for virtual-

ly every type of business. Joining these groups and engaging members with a conversation about topics you are familiar with is a good way to get your feet wet. Not only will you converse with like-minded

individuals, but you may learn something about your industry and your client base that you may have never considered otherwise.

Developing Relationships

Marketing is as much about demographics as it is you want to speak with directly to sell your services?

Sure, most loan originators would like to reach out to everyone who owns a home or is planning to

buy one, but that is not very realistic. Instead, define your target business partner and go after that

base. You have a much better chance of garnering

new business by reaching out to a select group of realtors, rather than blasting the entire real estate market in your area.

on when developing your marketing campaign.

Personally Branded Website

A website is an excellent way to provide a “digi-

tal business card” to the world. Many originators work for a company that provides a corporate web-

site where they can direct customers to for advice, questions, or information about the types of prod-

ucts and services you offer. However, a personally branded website sells you. This is a site that you can

personalize with information about your expertise, the types of products that you specialize in, and type of service customers can expect.

Loan originators do not always stay with the same

company. A personally branded site will also move with you as you further your career. It provides a

way for your business partners and previous clients

to keep track of where you are and what types of financing you continue to provide.

Blog

A personal blog is also a quick way for a mortgage professional to get their message out to the masses.

One misconception is that you have to know how to write to have a blog. That’s not true; you don’t have to be a good writer or even know how to write in-

teresting content to have a blog. Many bloggers just post links to articles that they think their customers would find interesting or educational.

Blogs are quickly becoming the medium of choice

for marketing firms. Besides offering insightful in-

formation, a blog can be shared on social media over

and over and reach an incredible amount of readers in a short amount of time.

One way is to specialize. Every loan originator has a

the first digital marketing tools used by the industry,

out to realtors and other professionals in your area. niche they like to work within. Be it VA, FHA, pur-

chase money, construction financing or hard money

loans, whatever it is, show your business partners why they should pick you. Many lenders choose to

market for business that is most profitable, but still,

it is smart to consider other options, such as fastest to close. Whichever product suits your taste, be spe-

cific, offer clarity, and demonstrate that you excel in providing that product to borrowers.

the mortgage industry, the best way to grow your

want to focus on delivery systems that work. For

A new business relationship provides much more

leading digital marketing tools you should focus

Email Marketing

Digital Marketing Platforms

business long-term is to build business partnerships.

audience. For loan originators, there are seven

Another concern is how to make yourself stand

Marketing has always been about developing rela-

tionships. Digital marketing is no different, and with

and read it. In the digital age, several platforms allow

As we indicated before, email branding was one of and even after all these years, it still works. While spamming has become a global scourge, email marketing to business partners or your existing customer base is still a good way to communicate. How-

ever, people’s time is valuable. Instead of sending out boring messages, many email campaigns contain

only a few lines of information and then a link to a blog or website. Remember – keep it short and sweet if you want to make sure the recipients will read your content.

When developing any good marketing plan you

Facebook | www.facebook.com

years, originators relied on direct mail to reach out

wide. It is the undisputed champ when it comes to

to potential clients. The problem is, that approach

Facebook recently surpassed 2 billion users worldcontinued on page 10

www.originate.report 9

social media. In fact, some marketers only advertise on

to post relevant articles, blogs, and other information and

vices offered, and call to action is essential to your digital

similar to a blog in that you can post articles, photos, and

tent.

barding consumers daily, finding and posting content that

Facebook; it is that powerful a digital tool. Facebook is other content that your contacts may find interesting. Like

promotes the community to comment and share the con-

your blog, you only want to post information that you

Opportunity | www.myopportunity.com

Some business users make the mistake of posting chain

provides an interesting way for professionals to network.

believe will attract potential clients or business partners.

mail, political content, goofy videos, or other content that may turn off many prospects.

LinkedIn | www.linkedin.com

Think of LinkedIn as Facebook for business. You can cre-

ate a profile page. Share and upload information about yourself. You can even create discussion groups and in-

teract with other business professionals across a variety of industries. In this manner, and the fact that LinkedIn

Opportunity is the newest business platform to emerge that Opportunity is a network of business professionals whom

each builds a profile detailing the services or products they provide, along with indicating what professional services he or she is seeking. The platform then allows users to

reach out to others who may be in need of their services,

and vice-versa. This feature is a great lead generation tool

and offers users the ability to reach out to customers all over the world.

has over 500 million worldwide users, LinkedIn is perhaps

Content and Consistency is Key

professionals.

the right blend of interesting articles, updated list of ser-

the best relationship building digital platform for industry LinkedIn provides a unique profile page whereas your

contacts are allowed to give feedback on your skill sets.

So, adding contacts with whom you have personally done business or those who understand your business, will be-

come your referral base for other users that may be considering using the services you provide.

ActiveRain | www.activerain.com

ActiveRain is a website community designed around real estate and real estate professionals. The site allows users

10 Originate Report | August 2017

As with any marketing campaign, content is king. Creating

marketing success. With the amount of information bomwill have people not only take notice but actually read, is

key to generating new leads and building strong business relationships.

If you are not an experienced marketer, this is the hard

part - consistency. Marketing is most successful when done on a regular basis. The good news is that digital platforms

make being consistent easier. To stay on your marketing task, you simply need to block out a little time each day, perhaps in the mornings or evenings, to post to your so-

cial profiles. Posting regular updates and new content will

keep your profile popping in your contacts’ timelines and remind them that you are ready and able to help them.

With a little effort, some creativity, and dedication to making a difference in your business, you can be on your way to becoming a master of marketing.

ABOUT THE AUTHOR: Ruby Keys is the Marketing and Communications

Director at Geraci Law Firm and Geraci Media. As a graduate from Vanguard University with a degree in Communications and an emphasis in Marketing and Public Relations, Ms. Keys joined Geraci to promote all aspects of the firm services in the media and coordinate educational resources for clients and trade associations. Ms. Keys focuses on the marketing, public relations, and communication details at Geraci Law Firm, plans all Geraci Media’s corporate conferences, and facilitates the dissemination of Originate Report.

CONTACT: (949) 379-2600 | ruby.keys@geracilawfirm.com | www.geracilawfirm.com

DISCOVER THE

Symbol of Excellence

FOR PRIVATE LENDING

Members of the American Association of Private Lenders are the new trend-setters in the private lending industry. From their voluntary adherence to a Code of Ethics to their knowledge of the private lending process, they are the gold standard for the profession.

Activate your membership with the American Association of Private Lenders to give your business the professional advantage and career boost it needs.

You will: • Join a viable network of industry experts.

• Get immediate recognition as an industry professional.

• Have a voice in creating the standards for the industry.

• Have access to exceptional professional development opportunities.

• Get added marketing support and opportunities to enhance your business.

It’s time to take your business to the next level.

JOIN AAPL TODAY!

AAPLONLINE.COM  (913) 888-1250

www.originate.report 11

COVER STORY

Mid-Life Calmness

How Years of Chaos Finally Led to Peace

By Drew Louis, Del Toro Loan Servicing

I

’m turning 50 in a few weeks and celebrating a mile-

lege education in the hours before and after work so she

ing of accomplishment he felt when he successfully fired

My dream for the next 50 years is not to acquire

work I saw from my parents and stepparents but I knew

about growing up during the depression, being at sea in

stone I hope proves to be my chronological mid-life.

more money or material things, but rather, to breathe and relax, to be a good husband, father, and friend…maybe a teacher.

As I write this story, I do not mean to infer that my life experiences are any better or worse, easier or harder

than the next person’s. My journey begins as a kid from

a middle class, small-town-family in Illinois where manners and work ethic were woven into most everyone’s DNA. I watched my dad pull double shifts, sometimes six

days a week, to get ahead. My mom continued her col-

12 Originate Report | August 2017

could have, and give us, a little more. I admired the hard early that I was a little different, I was meant to build an

up whatever gadget it happened to be. He told me stories the military and about hustling pool. One story that great-

empire. Starting around age 7, I sold whistles, Christmas

ly influenced me was how in 1940, desperate for work,

in cornfields during the day and restaurants at night. I

and wash dishes for free, in the hopes of earning a job. He

cards, candles and spaghetti forks door to door. I worked wanted to escape small-town and hit big-time.

My grandfather provided me a slightly different, more

entrepreneurial, lens by which to see my future. I would

hang out with him while he worked in his apartments or repaired household items he would buy defective. People

say he did this to save money; I knew it was for the feel-

he convinced a local restaurant owner to let him clean

hustled and a week later was given a job earning $0.05 an hour. In 1949, as another story goes, he invested his life’s

savings in Tucker Automotive stock. Sadly, as everyone warned him, he lost everything. Over 40 years as the town barber, he probably made no more than $2.00 a haircut

but because of what he taught himself, he built a signifi-

cant stock portfolio and retired a pretty wealthy guy.

suits or lose my license.

the market crash and ensuing economic collapse turned a

started a career as a stockbroker. I wasn’t the overnight

with time to spare and money for lawyers; I had neither

and colleagues, I was under investigation for securities

In 1989, largely due to my grandfather’s influence, I

success I thought I would be, but I drew on his story about the restaurant job and developed my plan. I saw successful

people work 10 hours a day so I worked 12. Other people

made 200 calls a day; I made 300. Whatever they did well, I did better and more often. I worked hard, believed in what I was doing and soon it was getting easy. One

year later I ranked in the top 5 brokers in my office. Two years later, I was one of the top

Pulling this off would be tough enough for someone but I did have records, conversation logs and notes above

and beyond what was required. Alone, I battled against teams of lawyers for over a year. When the final gavel fell,

six of the complaints were dismissed and I was victorious in five of the remaining six. I lost one case, alleging lack

of supervision over a junior broker. Since the award was

for only $2,300 of the $30,000 he sought and because I

microscope on the industry. Along with dozens of friends fraud. I was facing an unimaginable battle with no idea how to survive it, let alone win it.

After months of responding to subpoenas, compiling reports explaining my trading strategies, and in debt with legal bills, my future boiled down to one moment stand-

ing over a speakerphone in my attorney’s office. “Do you

plan to indict my client?” He asked. Seconds of silence

seemed like a lifetime before they announced, “No, your client has

producers company wide, and by

been cleared and is not a target

1999 I was one of the top earning

of our investigation.” While that

brokers in the industry, making

closed this chapter in my life, the

more in a month than my parents

trauma of the event hasn’t been

combined, earned in a year. I was

easy to shake.

on my way.

In the Spring of 2000, the

I requested a transfer from Wells

volatility in the dot com market

Fargo’s

seemed like a guaranteed way

ment, I liked the people and loved

empire. I started buying large

learning about mortgage lending.

positions on price dips, waiting

For a year, the 9 to 5 was going

to cash in on the rebound that

surprisingly well and in 2003, out

always followed. I tried talking

of the blue, I met and married Liz,

my grandfather into joining me

admittedly way above my pay-

but he didn’t get it; or did he?

grade.

The rebounds were taking longer

A couple years later, we

than I had planned and within a

learned that Liz’s cousin was in

couple weeks, I was down almost

foreclosure on her house. I tried

half a million dollars. The mar-

to help her through the bank, but

ket continued to chew up more

she was declined. As a last resort,

of my money every day, driving

I reached out to a friend who

my losses to over $750,000 with-

specialized in hard money loans.

in a month. At the time this was

Within a few days, we got her the

only about 3 months’ income so

money she needed to bring her

I wasn’t stepping out onto the

loan current, do some repairs,

ledge, just yet. Unbeknownst to

and place her home on the mar-

me, events already in motion

ket, capturing a lot of equity she

would turn out to be what pain-

would have otherwise lost. Un-

ful gut-wrenching movies are, and

locking the door to this world, I

were, made of.

saw opportunity everywhere and

The continued economic cha-

knew it, my income dried up and

department.

the more micromanaged environ-

make me famous and solidify my

pull out of the market. Before I

securities

Despite the dramatic pay cut and

to hit the home run that would

os caused most of my clients to

Desperately needing a change,

soon Liz and I had a good side business making hard money

Liz, Maverick, Cross, Katya, and Drew

loans to rehab contractors and builders that the bank wouldn’t

the $1,000,000 I bet on my home

run attempt was gone – I was

fund. Shortly after, I quit Wells

dead broke and psychologically frozen. Too embarrassed

won cross-complaints in two cases, I considered the expe-

Fargo to make a full time go of the hard money business.

ther felt back in 1949. It sounded a lot more romantic

sat back and allowed myself to feel proud for a little while.

child, Cross. Maybe not well-planned, but we both agreed

to ask, I silently wondered if that was how my grandfa-

and motivating when it was someone else’s story. Before

I could get my bearings, like a right hook out of nowhere, lawsuits started pouring in. Clients claimed they were, in hindsight, unsuitable for the stock market. They insisted

I maliciously capitalized on their naiveté and should be held liable for their losses. I would have to win these law-

rience a victory, and with that chapter of my life closed, I I didn’t have the empire of my dreams, but I survived a nightmare.

Over the next six months, I worked hard and things improved. I was paying bills and saving a little. I was finally feeling some stability. That ceased when I received

a registered letter from the FBI. The massive impact of

It was also the day Liz left her career to have our first it felt right.

The next few years making loans and buying real estate were fun and profitable. We spent the first year working

out of the lobby at Kinkos where, after a long day “at the office,” we would take our baskets of opened and used

continued on page 14

www.originate.report 13

items up for checkout. To me it wasn’t about saving the

money on office space, it was that same entrepreneurial feeling my grandfather had when he flipped the switch on one of his gadgets. Liz and I were a team; we had an ador-

able son, another one on the way, and good money in the bank – I couldn’t imagine how things could get any better.

Well, they didn’t; instead, we were hit by yet another sucker punch. Now, smack dab in the middle of the worst

real estate crash in 70 years, borrowers we lent money to walked from construction projects, second position loans

evaporated overnight, our rental properties plummeted in

value and good tenants moved out as the neighborhoods fell victim to foreclosures and squatters. On top of this, we learned that some real estate brokers and investors

we dealt with were really bad guys. They stole identities

I believe the inability to alter these moments to be a gift, meant to serve as tool for being a better husband, father, and friend… maybe a teacher. and used falsified applications and appraisals to borrow money they had no intention of ever repaying. Over 40

victims in all, we spent the next few months helping au-

thorities with their investigation and fighting with title insurance companies over our claims.

During all of this, plain old life happened too. My grandfather passed with unresolved issues between us.

I watched friends with life experiences like mine recov-

er and saw others tragically implode. Liz and I spent heart-breaking weeks in a burn unit beside our then

2-year-old son Maverick and 6 months later, beside our 3-day old daughter Katya, born with a heart condition.

Eventually, the dust settled and we realized that we

needed to rebuild once again. We decided to stay with

real estate and hard money. As risky as it had been, we felt that with some of the risk mitigated, it could be a far safer

option than the stock market. Realizing others could ben-

efit from a little more stability in the industry, we decided

we could build a business that would “do good, by doing good.” We worked with investors, borrowers, and indus-

try professionals to build relationships, develop tools, and provide services that make for more efficient, transparent,

and compliant hard money transactions and therefore, a better industry overall. Out of this came our brand pur-

pose, Connect Build Transform. Our commitment is to

provide clients with unbiased-third-party products, due

diligence and experience-share that increases returns and helps avoid sucker punches, at little or no cost to them.

Over the years, our Team has used lessons learned as-

sisting in over 10,000 transactions to help brokers make more money, investors avoid bad guys and bad decisions, and homeowners work out ways to stay in their homes

during times of crisis. Because of our client’s support, the

14 Originate Report | August 2017

Drew with memories of his grandfather

San Diego Business Journal ranked Del Toro as one of

lem is easier than solving one - the hard way, and I have

running, and we are currently a finalist on Inc. Magazine’s

small-town-family in Dwight, Illinois who appreciates the

“San Diego’s 100 Fastest Growing Companies,” two years list of the “Fastest Growing Companies in America.”

Reflecting, I see some events during my first 50 years

that I would like to have avoided, if I could. Knowing that altering the events would affect where I am today, I

wouldn’t take the risk. I believe the inability to alter these moments to be a gift, meant to serve as tool for being a better husband, father, and friend...maybe a teacher. Along

the way, I have learned that most sucker punches have

warning signs that I ignored or missed due to arrogance or inexperience. I have learned that preventing a prob-

learned that at heart, I’m still a kid from a middle class, example and support that my family provided.

Despite realizing that my journey didn’t have to be so

hard, I know that I am where and who I was meant to be.

I am sharing the lessons I have learned, and some of that mid-west DNA, to encourage my children to live bold-

ly, know that they are stronger than they realize and to embrace their journey. Once I have done that, my jour-

ney will have been worth every step. That would be my empire.

ABOUT THE AUTHOR: Drew is CEO of Del Toro Loan Servicing and a member of The California Mortgage Association, The American Association of Private

Lenders, The United Trustees Association and Entrepreneur’s Organization where he is servicing his fourth year on the Board of Directors. He has written numerous articles for industry publications and speaks and consults on matters of best practices, complacence and changes to the industry. Del Toro specializes in Loan Management tools including: Loan Processing, Loan Documents, Servicing, Loss Mit and Foreclosure Processing.

CONTACT: (619) 474-5400 | Drew@DelToroMail.com | DelToroLoanServicing.com

You’re going places.

Don’t stop until that place is the top.

If you’re a loan originator looking to build your business and gain insight from the nation’s top mortgage brokers, bankers, lenders, and lawyers, Originate Report is for you. Distributed to 35,000 professionals in the private lending industry every month, this is where you come to see and be seen.

To discuss submitting original articles, or for general Originate Report questions, email us at submissions@originate.report.

behind you all the way. find us online at www.originate.report www.originate.report 15

SPOTLIGHT

Industry Spotlight:

Dean Quiambao, CPA Partner, Business Development Armanino LLP

16 Originate Report | August 2017

Dean Quiambao, CPA Partner, Business Development Armanino LLP

OR: What excites you about the private lending industry?

DQ: For me, private lending is a simple business that provides unlimited opportunity.

OR: What does a typical day look like for you?

DQ: Consistent with most business leaders, I play the role of fireman, salesman and visionary at any moment. I’m always finding the right balance between working on the business versus working in the business.

OR: How do you leverage your time to be the most efficient?

DQ: In my role, I have to surround myself with the best team possible. From my sales and marketing team to our technical experts, I help them understand the “why” behind every transaction. I also invest my time to help them rapidly develop. Our clients move quickly, and we have to move just as fast, if not faster.

OR: What advice would you give a young professional starting in their career?

DQ: You should work to understand the “why” that is driving the needs of your buyers and your key stakeholders. Once you understand their motivation, the game slows down and the opportunity to win increases dramatically.

OR: What emphasis do you place on technology?

DQ: At Armanino, the purpose, core values, and strategic anchors that unite us as a firm drive our success and set us apart from our competitors. Our ability to rapidly adapt to technology is built into our DNA. OR: Do you feel that Armanino is a disruptor?

DQ: Of course.

OR: What do most people not know about you?

DQ: I’m Filipino and my wife is Japanese. When we were married, our wedding was featured in a bridal magazine thanks to its cultural flare.

Dean

is a Business Development partner with Armanino. After spending 12 years as an auditor in Armanino’s audit department, Dean transitioned to “Chief Relationship Builder” for the firm. In his role, he provides data-driven insights to his clients.

Along with his observations and recommendations, he enables his clients to gain a distinct advantage over their competitors and brings to light where the best courses of action can be taken. Dean maintains his membership within the American Institute of Certified Public Accountants and the California Society of CPAs. He is an alum of the University of California, where he earned a Bachelor of Science in Managerial Economics.

Originate Report: What made you want to join Armanino?

Dean Quiambao: When I joined Armanino, there was an infectious energy throughout the firm. It was an environment with no limits. And I still feel that way almost 16 years later.

OR: How have you grown your company?

DQ: Honestly, “the riches are in the niches.” We have a team of laser-focused experts in numerous niches including private lending. I have amazing partners in Josh Nevarez, Jason Gilbert and David Hersch. They live by the motto of Expertise + Quality + Service = Lightning In a Bottle.

OR: What tools do you use to interact with your customer base?

DQ: Often, our clients prefer cloud-based file exchange and accounting software. We must remain hyper-connected to create efficiencies in our processes.

OR: What is one piece of advice you would give to loan officers in general?

DQ: You have to have a potential exit strategy for every loan you want to fund. Ask yourself, “What would be our exit strategy on this loan?” and then ask yourself, “Is that exit strategy viable?”

OR: What are the must-have apps that you use for your business?

DQ: I’m always on the move, and I’m always looking to connect with new people. So, my top four apps would be Waze, Southwest, LinkedIn and Whova.

OR: How is Armanino automating business development?

DQ: Over the last few years, the firm has started to change its sales approach from the typical siloed, cowboy/cowgirl sales culture to a more collaborative team focus. We’re now fostering a sales environment where Partners with depth of expertise are collaborating to get the best result for our clients. We’re also ensuring we remain closely aligned with our marketing team to streamline and automate our lead generation and lead nurture infrastructure.

CONTACT: Dean Quiambao | (925) 790-2600 | deanq@amllp.com | www.armaninollp.com www.originate.report 17

SPECIAL SERIES

Closing on Time, EVERY Time Parts One & Two of a Six-Part Series

By Kasey R.J. Stevens, Top Division Escrow, Inc.

A

s a Senior Advisory Escrow Officer and Escrow Manager, as well as someone who has worked in this industry for more than a quarter of a century, I can’t say I’ve seen it all, but I can say I’ve seen a lot!

If you as a loan originator haven’t found that very special someone who drives your transactions from open to close, pay special attention over the next few months as I share six tips with you to help you close on time, every time. The first two—avoiding pitfalls and communicating with your closer—follow, and I’ll be sharing the rest in future issues of the Originate Report. Stay tuned!

18 Originate Report | August 2017

PART ONE:

Avoiding pitfalls that will delay the closing.

Being prepared for the absolute worst on any file is the best way to make sure that file-ending occurrences are kept to a minimum. For example: • Don’t let mechanics liens delay your closing. Contractors, subcontractors and suppliers can file what is called a mechanics lien on a homeowner’s property if they are not paid. These liens will have priority over your mortgage, so you’ll want to make sure these are taken care off well in advance to your closing date.

• Update your property report for recorded documents during escrow; not just at the time of closing.

• Request that your escrow officer have your preliminary title report dated down at least ten days prior to your estimated closing date.

As a loan originator, always gather as much information about your borrower and its affiliates as possible to have

on file. Even if your borrower is an LLC or other entity, have information on the principals of those entities on file (i.e., address, SSN, and full legal name). This will greatly help your escrow officer to clear all liens on title.

The mechanics lien process is worth understanding in order to avoid potential financial and legal pitfalls that can occur. One of the best resources to explain the intricacies of mechanics liens is the California Department of Consumer Affairs.

Each state has its own checklist (as do their various divisions/ departments), but if a lien pops up, below is a sample checklist of lien requirements pulled from the California Department of Consumer Affairs, Contractors State License Board site:1

Lien Requirements Checklist

P Check to see if a preliminary notice was given to you

within the specific timeframes. Direct contractors and laborers do not have to file preliminary notices. A subcontractor or material supplier has 20 days after beginning work or delivering materials to serve you a preliminary notice. If the notice is late, the claimant loses lien rights for work done or materials delivered more than 20 days before the notice. The claim against the property is only valid for work done or supplies delivered 20 days before notice was given and anytime thereafter.

Be sure the notice of mechanics lien accompanies the lien claim. The claim should include the amount owed, the service or products provided, the employer, the property owner, the address or description of where the work was done or products were delivered, the claimant’s address, and a proof of service affidavit (completed and signed by the person serving the notice and the claim).

Have your counsel verify if the potential lien claimant filed the mechanics lien within the legal time frame. If the potential lien claimant fails to record the mechanics lien within the appropriate timeframe, the lien isn’t valid. The potential lien claimant must record the mechanics lien within 90 days of: • Completion of work; • When the property owner began using the improvement; or • When the property owner accepted the improvement.

The commencement of using the improvement is sometimes hard to verify, because the homeowner often occupies the residence during construction. Contact your counsel for assistance on this point.

Have your counsel check with your local superior court to see if the subcontractor or material supplier filed a timely lien foreclosure action. A lien foreclosure action is a lawsuit to foreclose the mechanics lien. The lien claimant must file a lien foreclosure action within 90 days of the date that he/she recorded the mechanics lien. Often, a lien claimant with a valid claim will fail to follow through, making the lien invalid.

P

P

P

Make sure your client knows the difference between signing vs. closing escrow. When people talk about a real estate purchase, they sometimes use the terms “signing” and “closing” interchangeably in reference to the event when the buyers sign documents with Escrow. There are several events, however, that take place between the buyer’s signing appointment and the actual closing of the real estate transaction. Let’s take a moment and review that process: continued on page 20

www.originate.report 19

• Signing of documents. Escrow receives the loan doc-

uments (if applicable) from the loan originator and

prepares them for the buyer to sign, along with final statement and any other required documents. Upon receipt of the loan documents from the loan originator,

the escrow closer prepares the HUD-1 settlement state-

ment and all other legal documents required for the transfer of title into the buyer’s name.

• Loan originator reviews documents and funds the

loan. Once the loan documents have been signed, the

escrow officer delivers them back to the loan originator for review. When the loan originator is satisfied that all required documents have been signed and all outstand-

ing loan conditions have been met, the loan originator

will notify escrow that it is ready to disburse the loan funds to escrow. Upon receipt of the wire from the loan originator, the escrow officer is authorized to send the transfer documents to the county for recording. The timeframe for review is normally 24 to 48 hours.

• Released to record. Once recording is authorized by

not deal killers; however, they do ensure your settlement

refinance, no additional paperwork is needed, and it just

cases) to the county recorder’s office by the title in-

You may be thinking, “Why do I care?” Or, “ This is es-

want to proceed, so the solution is fairly simple – close

the loan originator, documents are carried (in most surance company. The transfer documents are record-

ed first, showing the transfer of the property to the

buyer, with the deed of trust recorded next. Recording the deed of trust just after transfer documents insures

the loan originator’s first lien position on the property.

Once the deeds have been recorded and the funds are available to the seller, we can say that we have “closed”

and the new owner may take possession of the property (as set forth in the purchase and sale agreement).

Many pitfalls in a closing are avoidable if you prepare for the worst, but sometimes it’s just being aware of a situa-

tion that’s already occurred that can save you the headache of a delay. And that brings us to Part Two…it may sound like the simplest thing in the world, but:

PART TWO:

Communicate with your closer.

Make sure your settlement agent has all the information you can give them. For example:

I had a file where a refinance was funding a purchase,

but not one party in either transaction thought to tell me

that the borrowers were going through a bitter divorce.

Had I known this was the situation, I might not have

scheduled both husband and wife to come to my office

at the same time on Friday afternoon! She brought the kids and he brought his new girlfriend…and this led to all

agent prioritizes the file.

crows’ problem,” and you are right…sort of. Your escrow

holder can only prepare for what they know about. It may not be a bad plan to tap out an email that lets your escrow

holder know, “Hey, by the way, they are going through a divorce,” or, “They inherited the property.”

When we send out seller closing packages on a “high maintenance” file vs. a standard file, there is a completely separate timeline. Generally, if we know that a delay can occur, we can generate an amendment to state that all

parties are aware that the final amount can change and that no further instruction is required. If we don’t know

that this is on the table, then it won’t be in our previous amendments.

But what if there is some kind of outside circumstance

where someone dragged their feet, made things slow

down on purpose, wasted time, refused to cooperate, etc.?

That is a mitigating factor in how much time needs to be

given to close. As you can see, there are as many reasons an escrow could delay as there are jelly beans in a jar.

closes late. Remember, in this situation, all parties still in a few days or extend with an amendment to cover the additional time needed.

In short, the final days just before the closing of escrow

are by far the busiest for the settlement agent and all other parties. At this point, all property disclosures have been delivered, any contingencies to the sale should have been satisfied, and the settlement agent has gathered most of the documents required to meet all closing requirements.

The nicest thing you can do for your settlement agent at

this point is to remind your borrower to remain available for the last few days while they put the file to bed. This

is not the time for a vacation where there is no phone reception. If there is a funding condition that needs the borrower’s signature, they need to be available.

Again, keep in mind that each time you avert disaster –

aka, a delay in closing – it gets easier to manage the next transaction the same way, until it becomes habit and each transaction runs smoothly…closing on time, every time.

What if the unthinkable happens and there is an un-

Keep watching Originate Report for the rest of Ka-

and loan originator) still want to complete the transac-

have any questions, reach out to Kasey Stevens at

controllable delay? If both buyer and seller (or borrower tion, then everyone continues on their merry way and

you close the escrow as quickly as you can. If the delay is only going to be a few days, there should be no problem

and an extension amendment is added to a sale. On a

sey’s tips to close on time! In the meantime, if you krjstevens@tdescrow.com.

1 http://www.cslb.ca.gov/Resources/GuidesAndPublications/HomeownersGuideToPreventingMechanicsLiens.pdf

ABOUT THE AUTHOR: Kasey Stevens closed 3 out of the 5 largest land

sorts of drama (a screaming match in the lobby that took

transactions in California history within the last 100 years, including Tustin Marine

purchase loan documents) that could have been avoided

successfully managed the largest builder desk in the nation at +1,000 transactions

two officers to break up) and delays (refusal to execute

Base, Pacific Century Land Transfer, and Civic Center Drive finance project. She

with a short e-mail or phone call.

per month, encompassing Los Angeles, San Diego, Orange County, and the Inland

nator have knowledge of, the settlement agents also need

closing manager (South-Eastern U.S.) for First American Corporate, and has 10

If there is anything going on that you as the loan origi-

Empire. Kasey started in the legal division of FNF for head legal counsel to post

to know. That includes deaths in the family, sick children

years experience as an expert witness for various firms, including FDIC cases.

or relatives, divorces, etc. The aforementioned items are

20 Originate Report | August 2017

CONTACT: (949) 900-6512 | krjstevens@tdescrow.com | www.tdescrow.com

September 10-12, 2017 The Cosmopolitan of Las Vegas

Join us at Captivate, where lenders will present their mortgage funds on stage before an audience of high net worth investors. If you are looking for capital for your real estate, development, or mortgage fund business, you can NOT miss this event.

www.geracicon.com

Contact Geraci’s Marketing Director Ruby Keys at Ruby@geracicon.com for more information www.originate.report 21

FEATURE STORY

Meeting the New HMDA Reporting Requirements

By Bryan Redington, Esq., Geraci Law Firm

22 Originate Report | August 2017

C

hanges are on the horizon for the mortgage in-

dustry; however, banks and credit unions are

hoping the government rethinks its approach

to new HMDA rules. The Home Mortgage Disclosure Act,

enacted in 1975, requires that banks and lenders gather

information about a borrower and provide loan details, including loan terms and conditions, in the form of early disclosures. Under the Dodd-Frank Wall Street Reform

and Consumer Protection Act, the Consumer Financial Protection Bureau (CFPB) was tasked with providing a final HMDA rule with further enhancements dictated un-

der the financial reform law.

As it stands now, the HMDA changes will go into effect on Jan. 1, 2018, and industry stakeholders need to con-

sider the ramifications the rules will have if not altered.

Banking associations such as the Independent Community

Bankers of America and the National Association of Federal-

ly-Insured Credit Unions have both been putting tremen-

dous pressure on the CFPB to halt implementation. Re-

gardless, lenders should prepare now for the inevitable rule changes that will take effect in the future.

ing years (i.e. 2016 and 2017), or 100 open-ended lines

software on your system, and you are ready to go.

rule that will affect the majority of lenders and how they

collecting data next year to report in 2019.

your loan applications, either in paper format or digitally

The CFPB has made some significant changes to the collect and disseminate loan data. So, it is important to see how HMDA changes will affect your business. First,

HMDA only applies to dwellings. A dwelling includes

The CFPB has made some significant changes to the rule that will affect the majority of lenders and how they collect and disseminate loan data. So, it is important to see how HMDA changes will affect your business.

principle residences, vacation homes, investment prop-

erties, condominiums, townhomes, mobile homes, and

apartment buildings. What is not considered a dwelling under HMDA? Properties like RVs, commercial proper-

ties, and office parks do not fall under the category of a dwelling under HMDA.

So, how do you know you are required to comply with

HMDA? Before discussing the changes scheduled to go into effect January 1st, let us look at the current rule and get an idea of who is mandated under HMDA. If, in the preceding calendar year, you originated home purchase

loans that equaled at least 10% of your total loan volume;

you originated home purchase loans that totaled at least $25 million; you have a home or branch office in a MSA;

or received applications for, originated, or purchased five or more home purchase loans over that period, or origi-

nated over 100 loans, you must already be collecting data for 2017 to report to the CFPB next year.

As for the changes going into effect next year, if you

originate at least 25 new loans over the past two preced-

of credit in each of the last two years, you need to start Let us take a look at the primary changes with the new rules:

Originations

Under the old rule, if a lender has $10 million in assets or

originated 100 or more home purchase loans, it is bound

by HMDA. The new rule does away with this asset stipulation and instead concentrates on the number of originations of closed-end purchase loans and open-end lines of credit that were originated.

Information Collection

New HMDA has added an additional 25 new data points that need to be collected in the Loan Application Register

(LAR), with 14 data points being revised. The data points

fall into four basic categories: Applicant, Property, Loan Features, and Unique Identifiers.

Reporting Mechanism

The CFPB is working on a new web-based submission

tool that will allow brokers and lenders to submit HMDA data on March 1, 2018. According to the CFPB, the system will be operational sometime this summer, but that is

yet to be officially determined. This tool is a free software

download provided by the bureau, so there will not be any

added cost to your company. You simply download the

Under the old HMDA rules, you could mail copies of stored on DVDs, or email the encrypted files. However, the new HMDA rules will not permit this. You must use

the web submission tool for transferring your collected data.

Also, you would send your data to a particular agency

depending on what type of lending business you were operating. This is no longer the case. Under the new HMDA

rules, you will submit all information directly to the CFPB. Providing all your information to the CFPB will be considered reporting to the correct oversight agency, regardless of your business model.

There is more to HMDA, but this is a good starting point to learn just what the new rules will require of mortgage

originators. We will need to monitor the implementation plan as it progresses. With so many banking groups lob-

bying for postponement, alterations, or outright scrapping

of the new rules, it is yet to be seen how the CFPB will respond under the new administration.

It is okay to hope for changes to the new HMDA before it takes effect, but you still need to prepare your business for changes that will inevitably be coming.

ABOUT THE AUTHOR: Bryan Redington is a Transactional Associate in

the Banking and Finance section of Geraci Law Firm. Mr. Redington obtained his Bachelor of Arts degree in American Law History from the University of California, Berkeley. Mr. Redington graduated from University of Oregon School of Law in 2016. While at Oregon, Mr. Redington gained experience clerking for both civil litigation and criminal defense firms. Mr. Redington’s research focused on expanding use of “Not in My Backyard” or (NIMBY) restrictive covenants across the country. Mr. Redington was involved in the Oregon Law 1L mentoring program where he helped incoming law students navigate their first year.

CONTACT: (949)379-2600 | bryan.redington@geracilawfirm.com | www.geracilawfirm.com

www.originate.report 23

FEATURE STORY

My Subject Property Has Been Contaminated...

Does that Mean I Shouldn’t Lend On It?

By Glen Berlo, eScreenLogic

E

nvironmental contamination is often a deal killer

being inhibited, and possible environmental liability for the

issued a No Further Action (NFA) letter or functional

property. No lender wants to find themselves in

stances, the costs of cleanup may be greater than the value

It’s not uncommon for regulatory bodies to allow residual

for lenders when they are looking to lend on a the unfortunate position of having to foreclose

on a property where environmental issues may prevent the salability of the site. Issues can be identified in a variety of different assessments:

borrower are all viable issues for lenders. In certain in-

of the asset - let alone the value of the loan. However, despite the obvious risks and enhanced need for concern, not all contaminated sites fall in the same lending risk profile.

Obtaining a solid understanding of the nature and ex-

• Screening Tools: Desktop assessments that involve an

tent of the environmental impact will help determine the

tory and historical documentation pertaining the subject

experienced environmental professional is recommended

environmental professional’s review of pertinent regulaand its surrounding area.

•P hase I: Assessments that involve a physical examination of the subject property as well as an extensive review of a

wide variety of documentation pertaining to the current

and historic land use of the subject and its surrounding area.

•P hase II: Involves sampling of the subsurface media at the subject (soil, groundwater, soil-vapor, etc.) to determine chemical concentration levels, if present.

•E nvironmental Report Reviews: Environmental pro-

fessional’s review of previously performed environmental assessment(s) at the subject site.

Concerns of collateral value being impacted, marketability

24 Originate Report | August 2017

amount of risk inherent in the property. Input from an to help make the determination. Listed below are insights into scenarios where lending may be much safer than otherwise assumed:

The chemicals of concern (COCs) are present but

at concentrations below regulatory environmental

screening levels. In many instances contamination exists, but at concentrations which (a) fall well within accept-

able levels as established by state and or federal regulatory bodies, (b) do not represent a threat to collateral value,

equivalent.

contamination to stay in place as part of a closure or No Further Action assessment. This typically happens when the source of the contamination has been removed or

remediated and there is no foreseeable threat to human health or the environment.

It’s important to note that the property may be subject

to future land-use restrictions as a condition to regulatory closure. More often than not, these restrictions do not

create a barrier to funding; however, understanding the borrower’s intended land use is important in these scenarios. You’ll want to identify up front what the borrower’s intended land use will be, as it may be inhibited by these

restrictions. If contamination is caused by an offsite source, it is not an ongoing concern, and does not rep-

resent a threat to human health or the environment at the subject site. These scenarios can be difficult for lend-

and (c) do not represent a threat to human health or the

ers to evaluate. However, if these conditions are well es-

Contamination exists, but an applicable regulatory

should be in a well-informed position to make a risk-based

environment.

body has closed its investigation at the subject site and

tablished by an environmental consultant, then the lender decision based on the following factors:

• The borrower is not responsible for the release and the

up accordingly. While some may think the borrower will

the magnitude of the impact. You may be surprised to find

financial hardship due to environmental issues inhibit-

that it all depends on the deal dynamics, and the benefit

ulator, your current assessment, or a prior investigation

related cleanup. As such, the borrower will not incur a

ing their ability to perform on the loan.

• The threat of a regulatory body requiring action by the

borrower is mitigated. This is due to the fact that the borrower is not the responsible party, the source of the release is offsite (that’s where remediation generally

takes place), and there is no threat to human health or the environment on the subject.

The lateral and vertical extent of the contamination

plume is well defined, limited to the subject site, AND the cost and time to remedy has been thorough-

ly documented. While this scenario may cause panic to

be reluctant to pursue this course of action, the reality is

of the loan to the borrower. In short, fifty to one hundred thousand dollars in capital-reserve clean-up costs may be a small price to pay when a multi-million dollar loan is at stake.

When contamination is identified at the subject site, the

extent of its impact will always be unique. Prior to lending, it’s critical to have a solid understanding of the subsurface media impacted, the source and type of the release, and

that these details have already been established by a regon the subject site.

The next time you find yourself in a position where en-

vironmental issues have created a concern, ask your consultant if any of the conditions identified at the subject

site align with the list of scenarios above. You may find that that risks to lending are not as alarming as originally anticipated.

many lenders, there are well established practices to cre-

ABOUT THE AUTHOR: Glen Berlo BS, MBA, JD is Vice President-Sales

require a capital reserve account to be set aside upfront by

national service provider in the lending industry. He has extensive experience

ating a safe lending avenue. The most common route is to the borrower prior to funding. Lenders will typically re-

quire the amount set aside to be in excess of the estimated costs of remediation for additional protection. The funds

can then be dispersed by the lender to subsidize the clean-

and Business Development at eScreenLogic. Glen has spent his career as a supporting the Origination, Servicing, Capital Markets, Fraud Prevention/Risk Management, and Loss Mitigation areas of lending.

CONTACT: (916) 288-8177 | g.berlo@escreenlogic.com | www.escreenlogic.com

www.originate.report 25

FEATURE STORY

Building a Strong Antitrust Compliance Program

By Melissa Martorella, Esq., Geraci Law Firm

26 Originate Report | August 2017

W

ith the Dodd-Frank Act in full

Employees of financial companies need to be

compliance plan is followed. Having employee

cial Protection Bureau (“CFPB”)

occur and understand what obligations they have

speaks about the importance of supporting com-

swing and the Consumer Finan-

seemingly issuing a new regulation or rule proposal each week, it is the right time for financial com-

panies to evaluate and strengthen their compliance programs as a preventative bulwark against federal antitrust violations.

Antitrust compliance should be a top priority of

any financial company who expects to stay ahead.

Complicated rules and numerous regulations have

saturated a market that nearly drowned under the weight of the fraud uncovered after the 2008 financial crisis. Out of that crisis, we were handed

the Dodd-Frank Act and the CFPB; both designed to regulate how the financial industry will operate.

Banks looking to upgrade their compliance pro-

grams need to understand the basics before getting started.

aware of the various types of violations that can under the law. To accomplish this level of compre-

hension, executives may require the compliance department to develop individual plans for each service the banks provide.

While understanding which laws need to be followed for each transaction may sound logical, translating that into a policy to train employees and desk traders may be ambitious. While speak-

The Justice Department is making strong examples out of financial industry professionals who they feel are damaging the market through antitrust violations.

Let the Market Dictate Tracking Communications

ing with banks about certain transactions that are

communication between competitors to ensure

constitutes a violation or antitrust risk.

Antitrust compliance relies heavily on tracking there is not a potential for collusion. But how far should company executives or compliance officers go in monitoring the communications of their employees?

Many banks communicate with each other for

a variety of reasons. Compliance officers should hold regular meetings with staff to ensure they un-

derstand which banks are competitors and which are partners. Internal compliance rules should in-

dicate just how much reporting should be done

when employees have contact with competing banks. Having workers report to executives every time they make a phone call will have the com-

pliance department buried in useless information, and is therefore unnecessary.

Compliance should meet with staff to clari-

fy what conversations are acceptable and which communication should be off limits altogether.

Certain types of communication may need to be

banned to head off potential violations. Likewise,

banks can monitor routine communications and

relay confidence to employees that there is no impropriety.

Not All Transactions are Identical

Banks and financial institutions often offer many

types of services to consumers. For different transactions, particular forms of violations could occur

if precautions are not taken. A compliance pro-

gram should be tailored to each type of operation instead of a “catch-all” type program.

part of normal business relationships, conversa-

tions may arise that could blur the lines on what Employees should expect to have ongoing training on the types of conversations that are ac-

ceptable and those that may cause a compliance finding. Department heads should be provided additional training to help them identify problem

areas before they become antitrust issues and prevent a potential discovery.

Executive Officers Must Oversee the Process

Industry experts have expressed concerns that some compliance programs are not designed from

the top down. The government is adamant that compliance programs must involve a company’s

senior executives. Most financial institutions understand the reality of this proposal and have taken steps to include senior management in every

phase of the compliance plan development. That

being said, officers of the company can also hinder the development of a program.

Executives do play a major role in ensuring a

meetings where the CEO or senior management pliance programs can go a long way in keeping staff motivated.

In today’s financial climate, where regulation is tighter than it has ever been, executives under-

stand having a robust compliance program is not just preferred – it is essential. Since most top ex-

ecutives are not familiar with the antitrust law, having an experienced and knowledgeable compli-

ance team is essential in being confident that your compliance program is up to the task.

Educate Employees on Importance of Following Compliance

Education is essential and plays a key role in any

new compliance program. Informing staff of the penalties they face if antitrust violations are un-

covered is not as much about frightening them as it is about instilling the importance they must place on compliance.

While it is not common, we have seen instances in the industry where employees attempt to cut

corners with compliance, or even take advantage of a situation for personal gain. They need to un-

derstand that if they get caught colluding on a transaction, they may be found guilty of a felony.

The Justice Department is making strong exam-

ples out of financial industry professionals who they feel are damaging the market through antitrust violations.

When employees fail to adhere to compliance requirements, they not only place themselves at risk but the entire firm. Financial institutions need to develop their compliance program by not only stressing the seriousness of federal penalties but

also have internal sanctions in place for staff who

do not follow compliance reporting guidelines.

While there may be legal ramifications for some

major violations, staff should also be made abun-

dantly aware that they will be held accountable for not living up to internal compliance program requirements.

ABOUT THE AUTHOR: Melissa Martorella joined Geraci Law Firm

as an Associate Attorney in the Banking and Finance section in 2015.

Ms. Martorella’s experience includes representing lenders and brokers, preparing commercial, residential, and construction loan documents, as well as drafting assignments, extensions, modifications, and subordination agreements. Ms. Martorella also has experience assisting with negotiating the terms of transactions, drafting custom language, and closing loans. Ms. Martorella has prepared loan documents for transactions all over the country and ensures compliance with state-specific laws.

CONTACT: (949) 379-2600 | melissa.martorella@geracilawfirm.com www.geracilawfirm.com

www.originate.report 27

TREND ALERT: Blockchain and the Loan Process

blockchain, the mortgage data is validated and transferred from the source to the intended recipient, all done securely and incorruptible, without third-party interference.

Loan Origination

Today’s loan process, while evolving into the digital realm, is still filled with transactional inefficiencies. The human interface between a hard file and mortgage software, unfortunately, includes the high probability of error. Blockchain could help remove risk and restore transparency to the process.

Blockchain has features such as distributed ledgers that could help when a file is moved between ledgers. The technology could allow for the immediate update of records and enable users to schedule transactions to occur based on certain timetables or established protocols.

Loan Fulfillment

Loan fulfillment is rife with the risk of error. Disclosures are a fact of life in the mortgage business, and missing a disclosure date could be the difference between a funded file and a do-over. Blockchain, with its smart contracts and unalterable data feature, can provide time-stamped proof that disclosures were sent within three business days.

Smart contracts could be written to speed up the process and provide the client with real-time delivery of a loan agreement.

Secondary Market

How Blockchain Can Improve Mortgage Systems

By Originate Report Staff

B

lockchain technology got its start by providing a solution for impenetrable, permanent transactions within the digital currency markets. However, more business sectors are now looking into how the relatively new software can help provide a secure and transparent solution for a myriad of financial, industrial, and commercial applications.

One industry looking to capitalize on the speed, security, and reliability of blockchain technology is the mortgage sector. Mortgage industry experts are looking to block-

28 Originate Report | August 2017

chain to help improve efficiencies throughout the mortgage process. Of particular appeal is the fact that blockchain is a peer-to-peer (P2P) exchange, meaning that it does not require a separate validation or handoff from a third-party to the transaction.

How can blockchain help make the mortgage process more efficient? Well, for starters, it can improve transaction times, reduce the chance of human error, and lower the overall cost of processing a loan file. All credit transaction information relies on the integrity of the source data. With

The mortgage securitization process is complex, and as we saw after the housing crisis, corrupted through human error. Blockchain can improve the secondary market process by offering smart contracts which can validate mortgage data, confirm pool requirements, and notify each concerned party all within a single transaction.

The securitization process, which relies so heavily on accurate data, can utilize blockchain to remove third-party interference and ensure the integrity of MISMO mortgage data. The technology could also be used to transfer mortgage servicing rights on sold loans, being especially helpful in streamlining the process of transferring notes during the secondary process. Improved transparency and instilling confidence in the integrity of the transaction will speed up the secondary market process and result in more liquidity quickly flowing back into lending markets.

Benefit to Borrowers

Borrowers will also benefit from the use of blockchain through improved efficiencies in the loan process. There are real costs associated with the processing of mortgage files. Each time a file is handled, be it the processor, underwriter, escrow, title, or funding, there is a cost incurred.

Blockchain technology could remove or streamline some of the processes associated with the loan, reducing costs, and allowing the lender to pass the savings on to the borrower.

There is more to be done before blockchain is fully integrated within the mortgage process, but these days, technology moves at the speed of light. The financial services sector is showing great interest in the software and its abilities. It is our hope that market forces will ultimately move the blockchain revolution forward.

Find out more about Blockchain in our September 2017 edition of Originate Report!

CONTACT: www.originate.report

You have knowledge. You have ideas.

Let us showcase your voice.

Currently we’re looking for articles showcasing: Business Development • Fintech/Newest Loan Programs • Automation in Today’s Evolving Society • Upcoming Trends & Changes • Marketing & Outreach Essential Tools & Technologies • New Legal Issues and Regulations.

Another idea? We’d love to hear that, too.

Write for us. Email Articles@Originate.Report for more information.

www.originate.report 29

UPCOMING EVENTS

Upcoming Events

Don’t be left out! Showcase your upcoming event here! Contact Ruby@originate.report for more information.

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

Captivate Conference 2017 SEPTEMBER 10-12, 2017 Las Vegas, NV www.geracicon.com/captivate

AAPL Conference 2017 NOVEMBER 12-14, 2017 Las Vegas, NV www.aaplconference.com

30 Originate Report | July August 2017 2017

JAN

NUARY

Innovate Conference 2018 FEBRUARY 7-9, 2018 Newport Beach, CA www.geracicon.com/innovate

FEBRUARY

MARCH

APRIL

MAY

JUNE

JULY

All event dates subject to change.

Please visit conference websites for agendas and details.

Event images courtesy 2017 Activate Conference www.originate.report 31

PROVIDING PEACE OF MIND As a full service law firm that caters to the private lending industry, Geraci’s team of bankruptcy, banking and finance, litigation, securities, corporate, and real estate attorneys has provided our clients with peace of mind for over a decade.

Let us deal with the legal side of your business—so you can stay focused on what’s really important.

32 Originate Report | August 2017

Geraci Law Firm | 949.298.8050 | www.geracilawfirm.com