BANKING NEWS FLASH December 31, 2013
Table of Contents Sales & Marketing ................................................................................................................. 3 Finance ................................................................................................................................. 8 Technology .......................................................................................................................... 13 Strategy .............................................................................................................................. 19
2|Sutherland Insights Banking News Flash Dec 31, 2013
Sales & Marketing Las Vegas-Area Home Sales Dip During November December 31, 2013 | National Mortgage Professional Magazine http://nationalmortgageprofessional.com/news45891/las-vegas-area-home-sales-dip-duringnovember Las Vegas-area home sales fell last month to the lowest level for a November in five years, the result of a constrained supply of homes for sale, waning affordability and the ongoing decline in investor purchases. The median sale price dipped slightly month-to-month but was still 26 percent higher than a year earlier, marking the 20th consecutive month with a year-over-year gain, according to San Diego-based DataQuick. In November, 3,539 new and resale houses and condos closed escrow in the Las Vegas-Paradise metro area (Clark County). That was down 15.4 percent from the month before and down 14.6 percent from a year earlier. On average, sales between October and November have fallen 3.9 percent since 1994, when DataQuick's complete Las Vegas-area statistics begin. Total November home sales were the lowest for that month since November 2008, when 3,325 sold, and were 18.9 percent below the average number sold during all months of November since 1994. However, resales of houses and condos combined were 5.1 percent above average for the month of November, while sales of newly built homes were 62.0 percent below the November average. The 48,203 homes sold in the region between January and November this year is 1.8 percent lower than the sales tally during the same period last year. Home sales have been limited this year by the thin supply of homes on the market, especially in the lower price ranges. Many owners in affordable neighborhoods still can’t afford to sell their homes because they owe more than they are worth, and lenders aren’t foreclosing on as many properties, further limiting supply. In November, sales of homes priced below $100,000 dropped 54.1 percent compared with a year earlier, while sub-$200,000 transactions fell 32.9 percent year-over-year. The number of homes that sold for $200,000 or more shot up 31.7 percent year-over-year. November sales of homes priced from $200,000 to $500,000 – a range that would include many move-up purchases – jumped 32.7 percent from a year earlier, while the number selling for $500,000 or more rose 20.8 percent ($500,000-plus sales represented only about 3.5 percent of November sales). Las Vegas region buyers paid a median $179,000 for all new and resale houses and condos sold in November, down 0.6 percent from $180,000 in October and up 25.6 percent from $142,500 a year earlier. October’s $180,000 median is the highest so far this year and is the highest for any month since November 2008, when the median was $190,000.
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The median sale price’s year-over-year gains over the past 20 consecutive months ranged from 1.7 percent to 35.3 percent. These annual gains have been double-digit for the last 17 months and above 20 percent for the last 13 months. However, November’s $179,000 median was still 42.6 percent below the region’s peak $312,000 median in November 2006. The run-up in home prices over the last year varies depending on price segment. In November, the lowest-cost third of the region’s housing stock saw a 40.4 percent year-over-year gain in the median price paid per square foot for resale single-family detached houses. The annual increase was 28.5 percent for the middle third of the market and 23.1 percent for the top, most-expensive third. The pressure that investors have been putting on the Las Vegas housing market continued to ease last month. Absentee buyers, which would include investors and some vacation-home buyers, purchased 42.4 percent of the homes sold in November. That was down from 43.1 percent the month before and 48.7 percent a year earlier. November's absentee share was the lowest since June 2010, when it was 37.5 percent. It was still above the monthly average of 35.4 percent since January 2000. In November, 88 Las Vegas-area buyers purchased two or more homes on the open market (excludes foreclosure auctions). That was down about 26 percent from 119 multi-home buyers during November 2012, based on an analysis of buyer names in the public record. (Note: In some cases individuals and partnerships buy under different names). In November this year, multi-home buyers purchased 387 homes in the Las Vegas area, which amounts to about 11 percent of all homes sold and represents a 3.5 percent decline from the number of properties that multi-home buyers purchased in November 2012. There were 15 buyers in November 2013 that each purchased five or more homes, but only seven bought 10 or more. Combined, the seven buyers who purchased 10 or more homes in November 2013 acquired 159 properties, or about 41 percent of all homes bought by multi-home buyers
Senate Bill Expands FHA Buyback Authority December 27, 2013 | National Mortgage News http://www.nationalmortgagenews.com/mortgage-servicing/Senate-Bill-Expands-FHA-BuybackAuthority-1040432-1.html The Federal Housing Administration has been urging Congress to expand its loan buyback powers for years and now it might be close to reaching its legislative goal The Senate Banking Committee approved a FHA reform bill (S. 1374) last July that expands the agency’s indemnification powers to seek buybacks or recover loan losses from all its direct endorsement lenders. Currently, FHA’s indemnification authority is limited to its largest originators that participate in the lender insurance program. However, the expanded indemnification powers come with certain limitations that are outlined in a legislative report the committee released Dec. 19.
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“To qualify for indemnification, the mortgage must have a material defect that would have prevented the loan from being insured or have involved fraud or misrepresentation. Except in cases of fraud or misrepresentation, the loan must have been delinquent within 36 months and resulted in a default,” the committee report says. Mortgage consultant Brian Chappelle noted that significant lender errors usually surface in the first 12 months. “While the industry would like a shorter window than 36 months,” he says, “at least it puts a time limit in place.” The FHA reform bill co-sponsored by Senate Banking Committee chairman Tim Johnson, D-S.D., and Sen. Mike Crapo, R-Idaho, also authorizes the agency to order transfers of mortgage servicing rights for the first time. “This section permits the HUD secretary to issue rules requiring an underperforming servicer to contract with a specialty subservicer for a single mortgage or any pool of mortgages,” the committee report says. FHA must give the servicer a reasonable amount of time to fix the problem before the MSRs are transferred to a specialty servicer. “The rules must also ensure the authority provided in this section only applies to activities that may materially and adversely affect the secretary’s ability to recover in the future and be limited to mortgages that share similar underwriting, borrower and performance characteristics,” the committee report says. The original draft of the bill gave FHA broader discretion to transfer servicing. The new servicing language is “actually an improvement from the original language,” Chappelle told NMN. “The industry would have been reluctant to service FHA loans if FHA could take the servicing at their own discretion.” Chappelle is a co-founder of Potomac Partners in Washington. There is speculation that Congress might pass the Senate FHA reform bill next year if it becomes clear the House and Senate will not be able to agree on a larger housing finance reform bill that deals with Fannie Mae and Freddie Mac.
Massachusetts AG Coakley Urges Congress to Extend Tax Relief for Struggling Homeowners December 27, 2013 | National Mortgage Professional Magazine http://nationalmortgageprofessional.com/news45856/massachusetts-ag-coakley-urges-congressextend-tax-relief-struggling-homeowners In order to continue to help distressed homeowners in Massachusetts and prevent disruption to an improving housing market, Massachusetts Attorney General Martha Coakley and a coalition of states are urging Congress to extend soon-to-be expired tax relief for distressed homeowners into next year.
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The federal Mortgage Forgiveness Tax Relief Act expires on Dec. 31, 2013. According to a letter to Congressional leaders signed by 42 state and territorial attorneys general, this tax relief is critical to the ongoing recovery of the housing market. “This tax relief is important not only for families impacted by the foreclosure crisis, but also for continued recovery of our housing market in the Commonwealth,” AG Coakley said. “We urge Congress to again extend this critical tax exclusion.” Under the Mortgage Debt Relief Act, in effect since 2007, mortgage debt that is forgiven after a foreclosure or short sale or through a loan modification provided to a homeowner in financial hardship may be excluded from a taxpayer’s calculation of taxable income. This exclusion only applies to mortgage debt forgiven on primary residences, not second homes. If the Act is not extended, homeowners will be forced to pay federal taxes on the forgiven mortgage debt. “We’ve made significant headway and seen real results achieved for our citizens through the National Mortgage Settlement and other programs that forgive or cancel mortgage debts through modifications, waivers of foreclosure deficiencies, or short sales,” reads the letter. “But this assistance will be less meaningful if the very homeowners that receive mortgage debt relief are hit with tax bills they cannot afford.” An extension for 2014 is included in the Mortgage Forgiveness Tax Relief Act (S 1187 and HR 2788), both of which are in committee, but it is uncertain when these bills may be considered. Last year, AG Coakley joined 41 other attorneys general in successfully persuading Congress to extend these benefits into 2013
GTBank acquires majority stake in Fina Bank December 26, 2013 | BBR http://retailbanking.banking-business-review.com/news/gtbank-acquires-majority-stake-in-finabank-261213-4151732 Nigeria-based Guaranty Trust Bank (GTBank) has acquired 70% interest in Fina Bank, a Kenyan bank with units in Uganda and Rwanda The acquisition follows a share sale and purchase agreement signed by GTBank and the shareholders of Fina Bank on 18 July 2013. The deal was subject to customary regulatory approvals, which have now been obtained. Following the acquisition, Fina Bank in Kenya, Rwanda and Uganda will now be renamed and rebranded as subsidiaries of GTBank. According to GTBank, the latest acquisition is part of a structured expansion program that will allow the bank tap into the vast business opportunities that abide within the region
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ECB creates new Euro Retail Payments Board to foster retail payment in EU December 20, 2013 | BBR http://payments.banking-business-review.com/news/ecb-creates-new-euro-retail-paymentsboard-to-foster-retail-payment-in-eu-201213-4149415 The European Central Bank (ECB) has formed is today announcing the creation of the Euro Retail Payments Board (ERPB). This new entity, which replaces the Single Euro Payments Area (SEPA) Council, will help foster the development of an integrated, innovative and competitive market for retail payments in euro in the European Union. The ERPB's composition and mandate will be broader than those of its predecessor. Seven representatives from the demand side (e.g. consumers, retailers and corporations) and seven from the supply side (banks and payment and e-money institutions) will sit on the Board (compared with five each on the SEPA Council). They will be joined by five representatives from the euro area national central banks and one representative from the non-euro area EU national central banks (all on a rotating basis). The ERPB is to be chaired by the ECB. The European Commission is invited to join as an observer. "Retail payments are the backbone of the real economy," said Benoît Cœuré, member of the ECB's Executive Board. "The integration of the European retail payments market is a natural consequence of the monetary union. It facilitates everyday life for European citizens and also trade, financial integration and market competitiveness in the European Union." The ERPB's work will consist mainly of identifying strategic issues and work priorities (including business practices, requirements and standards) and ensuring they are addressed. It starts its work as the payments sector prepares for the deadline for full migration to SEPA credit transfers and SEPA direct debits in the euro area. However, migration will not address all issues in the retail payments sector. Further integration efforts are needed in a number of areas, including card payments and innovation. The success of the ERPB will be determined by participants' contributions to the Board's work and their voluntary commitment to follow and uphold its common positions, guidance and statements. The ECB, which will provide secretarial support to the ERPB, is committed to undertaking all the necessary actions and to providing the resources needed to ensure its success.
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Finance UK may divest remaining 33% of Lloyds stake in 2014 December 30, 2013 | BBR http://retailbanking.banking-business-review.com/news/british-government-may-divestremaining-33-of-lloyds-stake-in-2014-301213-4152852 The British government is planning to divest its remaining 33% stake in Lloyds Banking Group over the next 12 months, as part of its strategy to complete the privatization of the bank and recoup the funds infused at the height of the financial crisis Sources close to the process were quoted by The Telegraph as saying that the entire 33% stake, which has been valued at nearly £18.4bn, would be disposed through a mixture of retail and institutional offerings. In September 2013, the Government sold nearly 6% stake, representing 4,282,034,109 shares of the bank's ordinary shares, for £3.2bn ($5.1bn). The disposal of the proposed stake will enable the UK government to recover some part of £21bn taxpayers' money, infused in Lloyds during the financial crisis of 2008. The sources told the English daily that buoyed by the earlier successful sale, the Government could announce a possible sale of the remaining stake, most probably with the publication of the bank's full-year financial results on 13 February 2014. "Post-results is when a further institutional offering would make most sense. After that, the thinking is [that] an autumn sale, combining an institutional and a retail segment, is a realistic prospect," one source told the news agency. "The full privatisation of the bank in 2014 may be a stretch and will be largely dependent on what it says about the dividend. Positive comments could open the way for a full exit," another source said. UK Financial Investments (UKFI), which manages the government's stakes in Lloyds and Royal Bank of Scotland (RBS), is reportedly exploring at different alternatives for the next sale of Lloyds shares. A Treasury spokesman told the news portal, "The Government will sell further stakes in Lloyds when it is in taxpayers' interest to do so. There is no fixed timetable to do this."
Wells Fargo in $591 million deal with Fannie Mae December 20, 2013 | KBOI http://www.kboi2.com/news/business/Wells-Fargo-in-591-million-deal-with-Fannie-Mae237981441.html SAN FRANCISCO (AP) - Wells Fargo says it has made a $591 million deal with Fannie Mae to settle obligations related to loans that went bad after the housing bubble burst.
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The deal announced Monday covers loans made through 2008. Wells Fargo & Co. says it resolves nearly all repurchase liabilities it has with Fannie Mae, the federal mortgage buyer. After adjusting for other repurchases, San Francisco-based Wells Fargo will pay out $541 million, which it says it had already set aside. Wells Fargo agreed in September to pay $869 million to Freddie Mac to settle similar claims. Lenders including Bank of America, Citigroup and JPMorgan Chase have also agreed to settle mortgage claims with Fannie this year.
GSE Foreclosure Prevention Actions top 3 Million December 24, 2013 | Mortagage News Daily http://www.mortgagenewsdaily.com/12232013_delinquncies_foreclosure_gse.asp The Federal Housing Finance Agency (FHFA) is celebrating the completion of more than 3 million foreclosure prevention actions by Freddie Mac and Fannie Mae since the two government sponsored enterprises (GSEs) were placed in conservatorship. Helping families avoid foreclosure through loan modification and other programs has been a priority of the agency and is one of the key goals of FHFA's Strategic Plan for the two companies. Foreclosure prevention is generally categorized as either home retention actions which include loan modifications, forbearance plans and repayment plans and or as foreclosure alternatives where homeowners are assisted to exit homeownership without foreclosure, usually through a short sale or a deed in lieu. "Three million completed foreclosure prevention actions is a significant achievement," said FHFA Acting Director Edward J. DeMarco. "It represents real assistance to homeowners, improved stability for their communities, and has produced meaningful savings for taxpayers. I am grateful for the persistent effort of everyone at FHFA, Fannie Mae, and Freddie Mac, who have contributed to reaching this milestone." The three million foreclosure prevention actions since September 2008 included 1.024 million trial modifications started through the Home Affordable Modification Program (HAMP) which resulted in 601,542 permanent modifications of which 431,852 are still active. Permanent modifications that were done outside of HAMP total 748,542. In addition the GSEs have put into place 736,033 repayment plans, 157,961 forbearance plans, and 9,717 charge-offs in lieu. Home forfeiture actions have resulted in 482,363 short sales and 49,383 deeds-in-lieu. Even though the housing crisis appears to be winding down, the two GSEs completed 74,879 home retention actions in the third quarter of 2013, 57,878 of which were loan modifications. This is down from the 87,675 home retention actions and 59,635 modifications in the second quarter. The companies completed 21,803 short sales (compared to 24,656 in the previous quarter) and 4,194 deeds in lieu (down from 4,757).
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Delinquencies in the GSE portfolios continue to drop, with loans 30 to 59 days past due falling from 513,000 in the second quarter to 460,000 in the third. 60 day plus loans fell from 915,000 to 852,000 and seriously delinquent loans from 783,000 to 724,000. The thirty-day delinquency rate was down from 1.83 percent to 1.64 percent and the serious delinquency rate from 2.78 percent to 2.56 percent. There were 117,000 foreclosure starts in the third quarter compared to 125,000 in the second and the number of housing units in the REO inventory increased slightly to 148,000 from 142,000. The number of third party and foreclosure sales increased by 1,000 to 56,000. The more than 3 million foreclosure prevention actions completed since the start of the conservatorships have helped roughly 2.5 million borrowers stay in their homes through loan modifications and other actions. In addition, over 500,000 borrowers avoided foreclosure through short sales or deeds-in-lieu. In addition to the foreclosure prevention actions, Fannie Mae and Freddie Mac have completed more than 18 million refinances since April 2009 including more than 2.9 million through the Home Affordable Refinance Program.
HSBC fined $6 million by Hong Kong watchdog over dark pool programme December 20, 2013 | Finextra http://www.finextra.com/news/announcement.aspx?pressreleaseid=53263 The Securities and Futures Commission (SFC) has reprimanded HSBC Securities Brokers (Asia) Limited (HSBC Securities), a wholly owned subsidiary of The Hongkong and Shanghai Banking Corporation Limited (HSBC), and fined it $5 million for providing inaccurate information to the SFC during a licence application process (Note 1). HSBC Securities submitted a licence application to carry on business in Type 7 (providing automated trading services) regulated activity for its provision of matching and crossing services in Hong Kong (Crossing Service) in May 2010. During the licence application process, HSBC Securities represented to the SFC that existing clients would be given the option of "opting in", by signing "opt in letters", if they wished to participate in the Crossing Service (the "opt in" approach). The SFC granted HSBC Securities a Type 7 licence in March 2011. In July 2011, the media reported that HSBC proposed to launch the Crossing Service to its retail clients, and that an "opt out" approach would be adopted, whereby clients would effectively be assumed to consent to their trades being matched and crossed on the Crossing Service unless they took the initiative to notify HSBC otherwise. This is contrary to the representations that HSBC Securities had made to the SFC during the licence application process (Notes 2 & 3).
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An SFC investigation found that: A preliminary decision by HSBC to change the enrolment approach for retail clients from "opt in" to "opt out" was made in mid-October 2010 but as a result of internal miscommunication, when the SFC specifically queried HSBC Securities in November 2010 whether the "opt in" approach would apply to retail clients, HSBC Securities misrepresented to the SFC that this would be the case. When the decision to change from "opt in" to "opt out" approach for retail clients was confirmed in around December 2010, HSBC Securities failed to notify the SFC about the change as required by the Securities and Futures (Licensing and Registration) (Information) Rules (Note 4). The SFC considers that HSBC Securities' failure to ensure the accuracy of information submitted to the SFC in support of its licence application and its failure to notify the SFC about the change from "opt in" to "opt out" approach for retail clients called into qualled into question its fitness and properness as a licensed person. In deciding the sanction, the SFC took into account that HSBC Securities has cooperated with the SFC in resolving the disciplinary action and agreed to engage an independent reviewer to review its access controls concerning trading information in the Crossing Service (Note 5). Notes: 1. HSBC Securities is licensed under the Securities and Futures Ordinance (SFO) to carry on business in Type 1 (dealing in securities) and Type 7 (providing automated trading services) regulated activities. 2. According to HSBC Securities, in connection with the provision of the Crossing Service, HSBC would be the client facing entity and HSBC Securities' only client. 3. On 8 August 2011, the SFC imposed a condition on HSBC Securities' licence to the effect that HSBC Securities shall only provide the Crossing Service to "professional investors", as defined in the SFO and its subsidiary legislation. 4. The Securities and Futures (Licensing and Registration) (Information) Rules require that certain changes in information that has previously been provided to the SFC in support of a licence application must be communicated to the SFC within seven days after the change takes place. The change from "opt in" approach to "opt out" approach for retail clients was a notifiable change. 5. In August 2012, HSBC Securities informed the SFC that it had discovered that certain functions in its trading system might indirectly have provided unintended internal visibility to orders in the Crossing Service. HSBC Securities suspended the Crossing Service immediately pending resolution of the matter, and has since taken steps to remedy this visibility issue and restarted the Crossing Service in September 2013.
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Convergex agrees to pay $151m to settle securities and wire fraud charges December 20, 2013 | BBR http://primebrokerages.banking-business-review.com/news/convergex-agrees-to-pay-151m-tosettle-securities-and-wire-fraud-charges-201213-4149410 ConvergEx Group, a brokerage firm agreed to pay more than $151m to US regulators to settle criminal and civil charges that it exaggerated fees when trading for clients, deceived charities and other big investors. As part of the settlement, ConvergEx, the parent company, paid $43.8m and signed a deferred prosecution agreement with the US Department of Justice (DoJ) to thwart criminal charges. Furthermore, it also paid $107m to the US Securities and Exchange Commission (SEC) and admitted wrongdoing to settle related civil charges. According to the US regulators, two former traders including Thomas Lekargeren and Jonathan Daspin at ConvergEx Group were engaged in sending trades through an overseas unit to add hidden markups and markdowns, subsequently pocketed millions of dollars in illegal charges, during 2006 through 2011. ConvergEx Global Markets Limited (CGM Limited), a former broker-dealer registered in Bermuda, and ConvergEx Group have agreed to pay in total a criminal penalty of nearly $18m and forfeit approximately $12.8m, for a total penalty of $30.8m. Apart from this, both firms agreed to pay restitution of about $12.8m to defrauded customers. In a parallel action, the U.S. Securities and Exchange Commission also reached a resolution today with three ConvergEx Group subsidiaries, Daspin and Lekargaren. DoJ acting assistant attorney general Mythili Raman said that ConvergEx along with several of its employees, engaged in a concerted and coordinated effort to fleece its clients by charging them millions of dollars in unwarranted fees and then concealed those charges from its clients through a pattern of deception. Assistant director in charge Parlave said, "With today's guilty pleas, ConvergEx and two of its employees admitted their roles in a scheme in which they committed securities fraud."
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Technology Mortgage Technology … Taking the Red Pill December 30, 2013 | National Mortgage Professional Magazine http://nationalmortgageprofessional.com/news45713/mortgage-technology-%E2%80%A6-takingred-pill “This is your last chance. After this, there is no turning back. You take the blue pill, the story ends; you wake up in your bed and believe whatever you want to believe. You take the red pill, you stay in Wonderland and I show you how deep the rabbit-hole goes.”—The Matrix A mortgage executive from a top five lender quoted this line from the movie The Matrix, a sci-fi thriller, while expressing the pros and cons of sophisticated mortgage technologies with me. I had to look this quote up after hearing it to fully understand the point, but it was that with mortgage technology and from the perspective of risk … once you start, it’s almost impossible to go back. Underwriting and technology It doesn’t seem like that long ago, but prior to Desktop Underwriter (DU) and Loan Prospector (LP), fraud tools, automated valuation models (AVM), and even before fax machines and email (yes…I’m that old), underwriting was very different. Underwriting was based on an assessment of documents and calculations. It was opening up a manila file folder, usually with notes on the outside and a checklist stapled on the inside. An underwriter opened the folder, did the review and within about 30-45 minutes provided an underwriting decision or conditions that would lead to an underwriting decision. This was never a perfect process, but it did generally keep underwriters alert and vigilant since decisions on loans were made based on their recommendations. I remember when I first tested out DU, my first thought was…”this is amazing!” My second thought quickly followed though and it was…”Ok…now do I still have a job?” For the first users it was pretty scary. Lenders were reworking their entire workflow to rely on this new technology and underwriters were being laid off simply because lenders didn’t need as many of them. Underwriting became a battle with a loan officer who had gone to their sales manager complaining that the underwriter was asking for things that DU didn’t. Why weren’t they just following the DU checklist or doing what it told them? The underwriters had to quickly point out simple things like that DU couldn’t see that the signatures didn’t match or that there was whiteout on the pay stubs. DU and LP were never meant to take away the underwriter … they were meant to supplement and support the underwriter, but they did leave gaps. These gaps were then filled by an industry that didn’t exist yet and quickly became known as the fraud tools. Adding technology … to technology … to a process that just a few years earlier was based on expertise and experience. Are you getting The Matrix analogy yet?
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Obviously there are many sides to this story, and I’ve personally been on a few of them more than once. Most of us believe in the value of the technology, but also concede that it can often make us complacent. I agree that the amount of data we have access to now in the areas of underwriting, fraud and quality is enlightening and can be incredibly valuable in the area of risk management. If not used correctly though…it can be addictive and with results that aren’t always actionable or efficient. Misunderstandings with technology I’ve been in the mortgage industry for 23 years now and still can honestly say that I love what I do. For the vast majority of that time I’ve been an underwriter and involved in either fraud or quality. I’m proud of the fact that I worked as the chief underwriter for both CoreLogic and DataVerify, and served with Interthinx for a short period in more of a consultant role. During that period, I also worked with the U.S. Treasury Department as a lead underwriter looking at the industry as a whole and all the various technology solutions available to it. I’ve even worked with a few companies as they looked to develop new technology platforms to compete with CID (CoreLogic, Interthinx and DataVerify) or new solution areas entirely. Previously as a consultant … my favorite part of my career was always talking about the technology pieces and how to best fit those pieces together into solutions that make sense for lenders. CID (CoreLogic, Interthinx and DataVerify) deserve a large amount of respect. They have built incredibly detailed solutions and provide phenomenal services. Each has a loyal following of users that rely on these tools. Each tool has areas of pros and cons, areas of concentration or areas of expertise in various subjects. When these tools are used correctly they can add valuable insight, but when these tools are represented or sold correctly by CID … there should (and usually is) a common thread. The tools are a supplement. They are there to assist the underwriter. If I had a dollar for every time I’ve heard an underwriter or an executive say that CID approved it, I’d be a very rich man. The CID solutions do not approve loan applications. The tools are there to add valuable support to the underwriter in making their decision. They do not and cannot replace an experienced underwriter. I personally like and have used each of these tools and in reviewing various lending cultures can make the argument on which one makes the most sense for a lender. It’s important to accept the idea that these tools by their very nature can create over reliance and false positives, but so can a dog. Let me explain. Long ago, I came up with the analogy that CID (CoreLogic, Interthinx and DataVerify) is like a barking dog. If you own a dog, you know the dog is always barking at something. Sometimes it’s barking at kids playing in the street. Sometimes it’s barking at the mailman. Sometimes it’s barking at a squirrel, but it’s always barking at something. Sometimes, however, it’s barking because of a fire, a break in or a stranger. I relate to these tools in the sense that as the owner of the dog … you learn the barks. You learn what to react to and what is just a “false positive.” Underwriters, fraud examiners and quality auditors using these tools need to react the same way. The tool is pointing out what it can “see” or “hear,” but it’s up the owner/user to interpret the incoming data. As with a dog, you can tone down the reactions to reduce the false positives, but they’re always there. You just need to make sure your underwriters are experienced enough to not under-react or overreact, and then creating inefficiencies to the process. You also have to decide how much information you can really handle. It’s not that you don’t want it. It’s just how much your company can actually make actionable.
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Conclusion Lending has risk … it always has and always will. The technology helps to mitigate that risk, but can never eliminate it. For those of us who would choose to take the “blue pill,” we need to make sure we have really good underwriters that understand both risk and the end goal. For those of us who would choose to take the “red pill,” we’ve got a lot of data coming in and we’re paying for all of it. Use it wisely to create new efficiencies when you can, try not to become numb or complacent and welcome to The Matrix.
2014 Forecast: Many Community Banks to Increase IT Investment Next Year December 27, 2013 | Bank Systems & Technology http://www.banktech.com/management-strategies/2014-forecast-many-community-banks-toin/240165037 Community bank executives expect their revenue to increase in the year ahead and plan to invest more of that revenue into IT, according to the 2013 KPMG Community Banking Outlook Survey. With 85% of the survey respondents reporting they expect their bank’s revenue to increase in the next year, 61% of them planned to increase capital spending. The most popular areas that bank plan to increase spending were IT (46%), new products and services (37%) and regulatory controls (24%), the survey found. The most important IT projects cited in the report revolved around mobile banking and payments (40%), leveraging data (22%), social media (15%) and online banking (15%), according to the survey. “Last year executives were telling us that mobile costs too much money to implement and they would wait on implementing it. This year branch traffic is down and customer demands are evolving,” says John Depman, KPMG’s national leader for regional and community banking. Few of the banks involved in the survey (13%) said they had high data and analytics literacy. “I think community banks need to understand the power and usefulness of dat and analytics. Once that’s understood culturally they’ll invest in it,” Depman notes. “If you think about how community banks can compete with big banks, they can find a way to outsource data and analytics. If they know how they will use it, they will find a vendor or partner.” Cyber security is also an area that community banks will focus on in the next year, the survey found. Nearly half (48%) of the respondents said they are moderately concerned about cyber security, with another 15% saying that it was an extreme concern for them. Although big banks are facing more sophisticated cyber threats than smaller institutions, community banks are still under constant threat from fraudsters, Depman points out. Regulatory Focus and Increased M&A Interest Many of the respondents (65%) said that they think it likely their bank would be involved in a merger or acquisition. Forty percent said they expect their bank to be on the buying side of a transaction, and 25% said they expect their institution to be on the selling side.
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The increased interest in M&A among community banks is tied to the growing cost of regulatory compliance, KPMG’s Depman says. “Compliance costs are up and it’s expensive to be a bank right now. It’s logical to spread that compliance cost over a bigger revenue base,” he explains. And with increased regulatory focus on capital levels with new Basel III and Dodd-Frank requirements taking effect, some community banks in need of new capital might find that it’s easier to simply sell the bank, he adds
EMV Migration Forum sees progress in important areas as US moves to EMV chip payments December 24, 2013 | BBR http://payments.banking-business-review.com/news/emv-migration-forum-sees-progress-inimportant-areas-as-us-moves-to-emv-chip-payments-241213-4150872 The U.S. migration to EMV chip payment technology is moving forward, and the cross-industry EMV Migration Forum and its Working Committees report significant progress in determining and addressing critical issues and implementation steps to ensure the migration is a success. This includes addressing the complex technical requirements for EMV debit implementation, for which the Forum's new Debit Technical Work Group was formed in November. "Though the U.S. has a complex payments ecosystem and faces ongoing regulatory uncertainties concerning debit, EMV Migration Forum members are committed to advancing U.S. EMV migration and achieving the technology's benefits -- reducing fraud, promoting global interoperability and providing a path to future payments innovation," said Randy Vanderhoof, director of the EMV Migration Forum. "While the U.S. still has challenges to address, real progress has been made in our migration." Industry progress of note includes: Acquirers have met the 2013 mandate for EMV readiness and are deploying EMV to their merchants as part of the normal upgrade path; ATM providers are actively deploying EMV-enabled ATMs; millions of EMV chip payment cards are in the marketplace; and merchants are investing in hardware upgrades to accept the payments. Helping to propel the industry forward are the EMV Migration Forum Working Committees, which continue to make progress through industry cooperation: Debit Working Committee and Debit Technical Work Group: With the July 31st ruling overturning the Fed's implementation of the Durbin Amendment, the Debit Working Committee has formed a Technical Work Group to examine technical solutions that can satisfy current and potential future regulatory requirements, whether at least two debit routing choices are required for each card, or for each transaction.
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As part of its work, the Debit Technical Work Group intends to deliver a technical proposal for Forum membership and industry consideration, setting forth a debit solution framework intended to follow the EMV specification and meet the unique technical and regulatory requirements of the U.S. debit market. Adoption of the proposed framework and specific technical solutions by individual industry stakeholders will ultimately depend on their own independent business decisions, considerations and circumstances. The Committee's Technical Work Group has participation from chip card and POS application experts representing the entire payments ecosystem, including regional debit network, major card brand, merchant, issuer, merchant acquirer, issuer processor and industry supplier members, and all are contributing their collective expertise and unique technical requirements for a debit solution. ATM Working Committee: The Committee is providing input, solutions and expertise to the ATM channel as it migrates to EMV chip technology. The Committee is working on a white paper, "Implementing EMV at the ATM," a complete implementation and planning guide for ATM acquirers, processors and vendors for implementing EMV chip technology in the U.S. ATM infrastructure. Testing and Certification Working Committee: The Committee is progressing in providing the critical education on the testing and certification requirements for all stakeholders depending on their role in the ecosystem. The Committee's white paper, "Current U.S. Payment Brand Requirements for the Acquiring Community," is available today for industry-wide use. The Committee is moving forward with an assessment of the current testing and certification processes to determine if processes can be streamlined. Communication and Education Working Committee: The Committee is making progress on projects to help build resources for the essential education piece of EMV chip migration for industry participants and consumers. The Committee's Standardization of Terminology is available today as an industry resource for educational and marketing communications, and the Committee is working on a set of recommended best practices for messaging and branding to consumers. Card-Not-Present Fraud Working Committee: While card-present fraud drops significantly, countries that have implemented EMV chip technology have reported a rise in card-not-present (CNP) fraud. Utilizing best practices from other markets and analyzing today's online fraud tools, this Committee is creating a comprehensive best practices strategy to mitigate against an increase in CNP fraud following U.S. EMV migration. U.S. Coordination Working Committee: Having identified industry coordination as integral to achieving a successful migration, this Committee continues to work on defining a potential "Phase One" EMV project in a focused geography with the goal of generating efficient and consistent operations and messaging across the industry. Earlier this month, the Forum had its most well-attended meeting to date with 240 individuals from 151 members companies. The EMV Migration Forum's next one-day Working Committee meeting will be held Feb. 3, 2014 in Salt Lake City, and the next two-day member conference will be held March 11-12, 2014 in Boston
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HSBC Private Bank to implement Avaloq banking suite December 23, 2013 | BBR http://retailbanking.banking-business-review.com/news/hsbc-private-bank-to-implement-avaloqbanking-suite-231213-4149890 HSBC Private Bank has decided to implement Avaloq Banking Suite for its private banking business across the globe to support its business requirements. Under the terms of the contract, which has been signed in December 2013, the completely integrated banking platform will be deployed at HSBC Private Bank's entities in Switzerland, Luxembourg, Monaco, Guernsey and Bermuda in the first phase. The Avaloq Banking Suite, which will be rolled out in other geographies later, is an integrated and complete technology for financial institutions, including wealth managers, private and retail banks. The bank selected Avaloq following a rigorous evaluation process as well as its ability to support a global business model as well as its functional richness. Furthermore, the banking platform uses the insights from its user community, systematically monitors and quickly addresses the demands of the regulatory environment on a global scale. Besides helping the lender to develop and market new products and services in a short span of time, the new tool is expected to simplify and standardize its operation on a global scale. HSBC global private banking chief operating officer John Armstrong said the functional richness and the international deployment capabilities are just two of the main reasons why they decided to go with the Avaloq Banking Suite for private banking business. "Through the implementation of the Avaloq Banking Suite we will significantly improve our operational efficiency, levels and consistency of customer service, while also improving our cost structure," Armstrong concluded
US Bank works on instant shopping app December 20, 2013 | Finextra http://www.finextra.com/news/fullstory.aspx?newsitemid=25564 US Bank is working on a new app that will enable consumers to use their mobile handsets to capture and buy products that they chance upon during their day-to-day lives. Using the eyes and ears of a mobile device, shoppers who see something they want to buy in a magazine, or hear an ad on the radio or TV, can use their mobile device to instantly capture, price and purchase the item, or save it to a wish list. The bank has released a video that conceptualises what the experience will look like in the future
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Strategy Homestreet Expands Into Pacific Northwest December 30, 2013 | National Mortgage Professional Magazine http://nationalmortgageprofessional.com/news45853/homestreet-expands-pacific-northwest HomeStreet Bank has announced that it has opened three new home loan centers in Washington and Oregon. The centers are located in Mill Creek (Western Washington), Kennewick (Eastern Washington) and Bend (Oregon). Now in its 92nd year, HomeStreet Bank is a diversified financial services company headquartered in Seattle with 30 retail deposit branches, 48 stand-alone home loan centers and four commercial lending centers in the Pacific Northwest, California and Hawaii
Wells Fargo and Fannie Mae Agree to $540 Million-Plus Repurchase Settlement December 30, 2013 | National Mortgage Professional Magazine http://nationalmortgageprofessional.com/news45886/Wells-Fargo-Fannie-Mae-Agree-%24540Million-Plus-Repurchase-Settlement On the heels of an $8 million-plus settlement with Flagstar Banks, Fannie Mae has reached another agreement, this time with Wells Fargo & Company, that resolves substantially all repurchase liabilities related to loans sold to Fannie Mae that were originated prior to Jan. 1, 2009. The $591 million agreement was adjusted for credits related to certain prior repurchases, resulting in a one-time cash payment to Fannie Mae of approximately $541 million. At Sept. 30 2013, Wells Fargo had fully accrued for the cost of the agreement.
South Korea May Issue $111B under New Covered Bonds Act December 27, 2013 | National Mortgage News http://www.nationalmortgagenews.com/dailybriefing/South-Korea-New-Covered-Bonds-Act1040426-1.html South Korea passed its covered bonds act this month to reduce Korean households' exposure to interest rate shocks by facilitating longer-term, fixed-rate mortgage lending. It is the first Asian country to have dedicated covered bond legislation The framework defines eligible issuers, the segregation of the covered assets post-insolvency of the issuer, eligible assets, the appointment of an independent monitor, and regulatory reporting requirements.
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The framework allows for a range of assets to be used as collateral for covered bonds, which include residential mortgages, municipal bonds, mortgage bonds or shipping and aircraft loans, Fitch said in a report. The minimum level of collateralization is set at 105% and covered bond issuance is limited to 8% of the issuer's total assets. Liquid assets used as substitution assets are also limited to 10% of the cover pool.
Allied Payment, ACI Worldwide partner to offer same-day bill payment December 24, 2013 | BBR http://payments.banking-business-review.com/news/allied-payment-aci-worldwide-partner-tooffer-same-day-bill-payment-241213-4150809 Allied Payment Network, an online and mobile bill payment services provider, has joined hands with ACI Worldwide, to provide same-day bill payment capabilities through Allied's mobile photo bill pay technology, Picture Pay. Under the terms of the agreement, Picture Pay will be combined with the ACI Bill Payment Engine and proprietary Biller Endpoint Network (BEN), an electronic biller network that delivers millions of payments each month. Following integration, the Picture Pay's customers will be able to process the bill payment same-day by taking a photo of any bill using their smartphone, entering the amount and payment date, and the bill is paid. According to the company, Picture Pay's technology reads the data from the bill, and syncs with the user's bank or credit union to process the payment. Picture Pay's standardized bill payment option generally takes one to three days. The new facility with same-day and next-day payment options, will enable financial institutions to offer their customers more control over the timing of their payments, while generating new revenue stream for the institution. Allied Payment Network president Ralph Marcuccilli said, "Our goal is to simplify the bill payment process as much as possible while driving this process to the more convenient mobile channel, and with Picture Pay, financial institutions' customers can even add a new biller with the simple snap of a photo." "By partnering with ACI, we can now provide Picture Pay users with a whole new level of convenience - same-day bill payment processing, which in turn generates additional fee revenue for our financial institution customers."
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MasterCard, eServGlobal and BICS form remittance joint venture December 20, 2013 | BBR http://payments.banking-business-review.com/news/mastercard-eservglobal-and-bics-formremittance-joint-venture-201213-4149411 Global payment and technology company MasterCard, eServGlobal and BICS has established a new a joint venture (JV) HomeSend, which will allow consumers to send money using their mobile money accounts, payment cards, bank accounts or cash outlets. The new remittance JV will use the current HomeSend platform, a remittance hub based on eServGlobal technology and developed as part of a strategic alliance between eServGlobal and BICS. The HomeSend JV will offer consumers new options and flexibility for sending or receiving funds and enable cross border remittance payments, by linking the global community of telecom partners and MTOs to the more than 24,000 financial institutions on the MasterCard network. MasterCard chief emerging payments officer Ed McLaughlin said that HomeSend will provide an important platform to deliver improved remittance services, and bring person-to-person transfer capabilities to more financially underserved consumers around the globe. "MasterCard, eServGlobal and BICS each brings its own unique contribution to the newly formed entity. Collectively, we have an opportunity to improve people's lives," McLaughlin added. MasterCard will have a controlling stake in the HomeSend JV. MasterCard payments processing network connects consumers, financial institutions, merchants, governments and businesses in more than 210 countries and geographies.
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