TNR - May 2012 Loan Officer Edition by The Niche Report

Issue 058 May 2012 TheNicheReport.com

For Mortgage Origination Professionals

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Lenders: Stop Throwing Your Money Away Make tolerance violations a thing of the past with the right technology tools

FEATURE ARTICLE Painful Lessons from the Crippling Bank Lawsuits

The Key to Success in a Compliant World Know the motive behind the regulation

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CONTENTS

Issue 58

May 2012

CLASSIFIEDS prime & FHA

pg 49

Commercial

pg 49

REVERSE MORTGAGE

pg 49

HARD MONEY

pg 50

JUMBO

pg 50

Painful Lessons from the Crippling Bank Lawsuits

MULTIFAMILY

pg 50

Service Providers

pg 51

Peter HĂŠbert

Publishers Robert Pegg robert@thenichereport.com David Pegg david@thenichereport.com

12 25 28

Lenders: Stop Throwing Away Your Money Cathy Blaszyk Vice president, Lender services La jolla Make tolerance violations a thing of the past with the right data and technology tools.

Going to Closings Ralph lovoulo sr. president mortgage motivator The sure way to develop new business.

Web 2.0 Marketing Secrets for Mortgage Pros Doren Aldana mortgage marketing coach Secret #5: Use "Consumer Tip" videos to explode your referrals!

Communicating with Buyers Leif Boyd american pacific mortgage Keep all parties informed during the closing process.

May 2012

40 43

MANAGING EDITOR Stewart Mednick stewart@thenichereport.com

The Key to Success in a Compliant World Todd k. ballenger ceo kendalltodd Know the motive behind the regulation.

Center Stage with In Touch Today The Niche Report

DEPARTMENTS

09 10 37 45 47 54 58

Associate Editor Cathy Johnson info@thenichereport.com ACCOUNTING MANAGER Shawna Ingram shawna@thenichereport.com Advertising Director Jessica Grizzle Jessica@thenichereport.com Advertising sales Heather Bopp Heather@thenichereport.com Production Manager Henry Suchman henry@thenichereport.com

from the editor's desk

Production Assistant Dawn Exner dawn@thenichereport.com

letters to the editor

Cartoonist Martin Bradford

Keeping up with the Jones

COLUMNISTS & Contributing Authors Martin Andelman Doren Aldana Todd K. Ballenger Cathy Blaszyk Leif Boyd Karen Deis Peter HĂŠbert Chris Jones Ralph LoVuolo, Sr.

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From the editor's desk

Compliance and regulatory change is the theme for this month. It seems to me that this is a cause-and-effect type theme. If there is no current compliance, then there is a new regulation created. This happens in every industry, politics, sports, law, etc. The funny thing, as a personal observation, is that the very minority is the typical cause of the majority of new regulation. Now, I am speaking in gross generalities, but there are many examples in history. Let’s take the Glass-Steagall Act of 1933, which basically was a result of the Wall Street Crash of 1929. Senator Glass used the commercial banking theory of separating commercial and investment banks, to criticize banks for their involvement in securities markets. Glass condemned banks for lending to stock market “speculators” and for underwriting “risky” or “utterly worthless” securities, particularly foreign securities that were sold to unsophisticated bank depositors and small “correspondent banks.” Sounds like history repeats itself. Steroid use in various sports by athletes spawned new regulations. The use of “exotic loans” in the mortgage industry initiated a regulatory change in lending. Attempted bombings onboard aircraft resulted in the advent of screening and controlled entry into airport terminals. I am sure you can think of many other examples. The events that domino into new laws are catastrophic. The laws affect an industry, a community, a society… and are the result of a small minority’s actions. Mortgage is no different. So read and learn. Ponder the content of the articles in this issue of The Niche Report, and send us feedback. Time to rally and bring the mortgage industry back to the pinnacle of professions to envy! Go close loans with compliance!

Cheers!

Stewart Mednick

Official

MEMBER

TheNicheReport.com

letters to the editor

Letters to the editor I have followed the Niche Report for almost 5 years. You have great topics and allow controversy to be fully expressed. Keep up the good work. James J. D I really liked the article you wrote about NAMB WEST. I am glad to see that, as always, you are behind brokers 100%. I think in the long run, brokers are doing a better job for the consumer than what is being portrayed. Donald J. F I just read your article on "Bringing up the Rear". I agree the foreclosure bailout is a joke. One, throwing good money after bad is always a failure. Secondly, rewarding people with bad financial habits with money never fixes their problems no matter how paltry the amount. I can't imagine the financial consequences this has on the "big banks" to research frivolous complaints from people that lived in their house for months or years without paying. Where do you think that burden is going to fall? The one’s who pay their mortgages and tax bills. Banks will either go out of business or pass the cost on to the next generation of consumers/borrowers/ homeowners. I'm sure the ones that were unjustly kicked out have already found an attorney to sue the banks, the rest didn't have a viable claim or they would've sued already too. I've been in the real estate business almost 20 years and have yet to hear of someone getting foreclosed on that actually paid their loan on time. Thanks for highlighting this important issue! Mona M I resigned as a mortgage lender last year after my husband died. I recently started reading Bringing Up the Rear again. About three paragraphs into the “Eric Holder” issue I was hooked again. I love your writing. Even though the housing issues no longer impact my life

May 2012

day to day, I read your pieces for the shear love of the writing. Keep up the good work. There is something that no one has written about concerning the homeowners who have lost their homes through foreclosure: the negative impact this has on their credit in general. Most folks, when things get tough, stop paying everything else for six months to a year while they scramble to scrape together the mortgage payments. When they finally let the house go they not only have a foreclosure on their credit, they have delinquencies, charge offs and collections from all their other creditors. What this means is that even if everyone found stable, good paying jobs tomorrow and the government forced the mortgage companies to delete the foreclosure on the borrowers' credit, there would still be a half dozen other creditors who have trashed the borrowers' credit history and they will not delete those references. That crap stays on a report for seven years. Add to that the new restrictions on credit scores which took the minimal acceptable score from 580 to 680 and there ain't gonna be a big rush by apartment and Mom's basement dwellers to buy houses again. I predict that we will not see a housing recovery until 2015 or longer. And if housing stays flat, there will not be robust employment for blue collar workers for a long time. Thanks again for writing some of the only purposeful critiques on housing. Maureen I just finished reading your report on HVCC from last October. I closed my appraisal firm in 2009 after spending two decades building it. I've been attempting to organize appraisers (like herding cats) since 2008 against this injustice. It's been a futile attempt to say the least. After reading your article I can see why it's been so difficult to educate

people on this crime. It's not easy to understand when people typically give you five to ten seconds to capture their attention. David F I have always read with great interest Bringing up the Rear; I find it not only informative, but entertaining at times as well. In reading this issues column, and the many things you have to say and object to with Neil Lipschutz, about his 'he just doesn’t get it' thinking or his downright 'brain farts'...instead of lamenting in the book about it, why haven't you also written that column directly to him, as you have written it there, in a letter form, and asking him to defend his stand on the column to make him realize that he is so far out to lunch, there isn't the remotest chance in hell that he'll ever get back. It would be interesting to have him defend his thinking, or lack of, as you point out in the column, and who knows, it might bring him back into the realm of reality. Such a waste to call him on the carpet in the magazine that he'll never see; it needs to be put in front of his face just as you have laid it out there, line by line. Just curious, and thanks. Kerry M Letters to the Editor may be e-mailed to info@TheNicheReport.com or faxed to 703-991-2362. Include your full name, email address, and daytime phone number. We are unable to publish all letters and may edit letters for length and clarity. Visit us online at www.TheNicheReport. com to subscribe to our magazine and/or eNewsletter. Or call toll-free at 866-964-2695 for more information.

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Lenders: Stop Throwing Away Your Money Lenders can make tolerance violations a thing of the past with the right data and technology tools. by Cathy Blaszyk

t certainly isn’t an easy time for lenders; that fact is inarguable. With tightening regulations and additional legislation still to come, they must adapt to an environment that not only continues to change, but is completely unpredictable. Despite the indisputable challenges, too many lenders are wasting time, energy and manpower using antiquated methods that should be handled by technology. Ignoring new innovations and tools is dangerous for lenders’ businesses – they risk costly mistakes at every point in the loan origination process. In a business that relies heavily on referrals from satisfied customers, lenders that do not update their procedures lose the opportunity to provide borrowers with a smooth, pleasant customer experience. In today’s competitive marketplace, they absolutely cannot afford to disregard the importance of creating a simplified and more positive process for consumers while reducing overhead costs. Currently, one of lenders’ most significant concerns 12

May 2012

are the more stringent RESPA regulations regarding good faith estimates (GFE). Lenders must present GFEs within three days of receiving a loan application, meaning they must generate these estimates more quickly than ever before. Many lenders continue to gather the necessary data using outdated tables and spreadsheets, resulting in one of two problems: they either overdisclose or underdisclose. In today’s environment lenders are well aware that they are not using the most current closing services, recording fee and transfer tax data, which makes tolerance violations inevitable. Yet, given the extreme time restraints, managing accurate, up-to-date data simply is not their highest priority. Lenders who decide to “play it safe” and overdisclose now are realizing that in reality, this method leads to missed opportunities and the loss of a competitive edge.

Eliminate costly violations at every turn The high-tech world in which we live means there is no longer any reason for a lender to watch money fly out the window in the form of tolerance violations. Based on our evaluation of the market, we found that lenders not

utilizing the latest technology still typically incur $375,000 or more in RESPA tolerance violations each year. These expenditures, which lenders have come to expect, can be avoided almost entirely. Unable to manage and maintain closing service provider rates and their constant changes, lenders must enlist the help of a data provider that undergoes the painstaking process of updating rate content by working directly with the service providers, performing error testing analysis and then delivering that information. A data provider can give a lender instant access to a comprehensive network of service providers from across the country – removing all of the work that requires so much manpower and costly overhead to maintain. Many lenders also continue to leave themselves exposed in the area of transfer taxes, which are held to zero tolerance. Today, when approximately 60 percent of all transactions are refinances, keeping accurate recording fee estimates poses a challenge, and errors become more frequent when transfer taxes are not taken into consideration in certain geographic locations. In reality, there are numerous triggers that can create a variance in the transfer tax amount; for example, if the payoff of a previous loan to a new loan at the point of application is estimated to be higher than the actual demand reflects, the tax would increase. Without the assistance of technology, lenders are having difficulty solving this issue. However, they can avoid fees altogether by using technology that automatically updates information and can calculate an accurate transfer tax response for any transaction. The economic downturn has left countless consumers with damaged credit, and for loan-qualifying purposes it has now become commonplace for an individual to be added or removed from the loan application. For

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example, a spouse with unhurt credit might refinance in his or her name, as opposed to having both names listed on the application, or someone might be removed in the case of a divorce. Transfer tax errors are also made when an additional person is added to a title to help the borrower following his or her job loss and subsequent income decrease. Each of these circumstances can generate a taxable event that lenders often do not account for – a costly mistake they pay for in fines. Another common situation that forces lenders to pay unnecessary cures occurs when borrowers are required to pay off a credit card or some form of debt to qualify for a loan. Many times this requires the release of additional liens or the recording of documents, such as a Power of Attorney, that were identified at the time of application. While these events each present a rightful change in circumstance, lenders often do not possess the technology or manpower to update their files and re-disclose them to the borrower, and in the end must pay the cure on the HUD-1 for their tolerance violation. When a file is ready to draw loan documents, it is essential for lenders to have a system in place capable of quickly re-verifying transfer tax and recording fees, making the necessary changes and updating GFE disclosures to avoid expensive violations.

Prepare for now and the future While it is clear that regulatory change already significantly impacts lenders, they must institute adequate support for their businesses in preparation for the inevitable changes still to come. The Consumer Financial Protection Bureau (CFPB) is working to refine its regulations aimed at protecting consumers as they navigate this process; unfortunately, this could likely mean even tighter limitations and heightened oversight for lenders. The CFPB could potentially hold lenders to higher standards for GFEs as well. For example, there has been mention of holding affiliated providers to zero tolerance from the former 10 percent tolerance for accuracy. In addition, the proposed form changes seem to remove the “Charges that can change” category, which typically houses the “buyer selected” providers list on the HUD1 comparison. That alteration would make lenders accountable for all quotes, regardless of whether the borrower selected the provider. While new rules are largely just speculation at this point, what we do know is that lenders will need to position themselves to adapt quickly.

They can best prepare their organizations by deploying the technology sooner rather than later, ensuring they are already using the best data and tools available in advance of additional legislative changes. Lenders should also rely on technology in an effort to improve document retention, as the presence of an audit trail for every loan file, from start through closing, is now essential. Lenders must find improved means to maintain documents and provide date-stamped records showing the items within every quote, the reasoning behind them and a clear demonstration of any changes. This level of detail is now required, and lenders can only create a truly accurate, complete audit trail through automation.

Save money, improve your business Lenders are in the business of originations, yet in today’s complex environment it has become increasingly difficult for them to focus on their core competencies and deliver the best service. Without the manpower to handle data management and provide the real-time service provider rates needed, many lenders have resigned themselves to the fact that tolerance violations are an inevitable cost of doing business, but this does not have

to be the case. Technological solutions are available today that reduce overhead costs, lessen the number of human “touches” each loan file requires, and enable lenders to operate more accurately from start to finish, resulting in the successful outcome of regulatory audits. In the midst of an evolving and recovering industry, lenders must commit to making the considerable changes necessary not only to stay in business, but to thrive. While a technology investment is typically never a quick decision, a preliminary ROI will show the longer lenders wait to render a decision, the more they lose in fines and operational expenses each day. By removing obsolete practices and replacing them with technology, lenders can accommodate today’s need for accurate data, accelerated processes and satisfied borrowers.

Cathy Blaszyk is vice president of lender services for La Jolla, Calif.-based ClosingCorp, an independent real estate data and technology company that develops online data services for mortgage lenders, real estate professionals and consumers to expedite closing activities.

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Painful Lessons From The crippling Bank Lawsuits by Peter hébert

hen Bank of America’s logo is transformed by an angered customer to read Bend Over America, something is wrong with banking. That bank took bailout money in 2008, paid no federal taxes in 2010, and fired 30,000 of its employees in 2011. The public sentiment for just this prima facie absurdity is that Bank of America deserves to be sued for being an incorrigible deadbeat. But, let’s set aside the rhetoric and satire and look closer. The fact is, all of the banks are deadbeats given the nature of the lawsuits against them.1 There are too many to count, and they come in all

shapes and sizes. And, they’ve all been repeatedly sued for securities fraud, origination fraud, false claims, and on and on. It’s 1933 all over again. We have a repeat performance of the bank panic and foreclosure crisis from the past, but this time it is so much more worse. How did we get here? There was high-level and widespread incompetence and dishonesty across the financial sector. The federal government then undermined the free market and blocked the judicial process from clearing the markets. The federal government then passed a series of one-sided laws that

favored corporations at the expense of the government and the tax-paying public. In the process, the Federal Reserve— the nation’s leading banking regulator—was bestowed with more regulatory powers, though it had not competently regulated the banking system that was under its oversight. In fact, back-to-back rounds of quantitative easing and sustained low interest rates have served only to benefit stockholders, but have done nothing for employment, which is part of the central bank’s mandate. Are the countless lawsuits against the banks and “the system” justified? Are there any real lessons we can learn from the complaints? Has the system been gamed beyond repair? As of April 2010, about 2,000 lawsuits had been filed against appraisers, of which 75 percent were filed by borrowers claiming $100 million in aggregated damages.2 There are indeed several painful lessons from the many lawsuits. We will take a big picture and systematic approach to examine a few representative complaints in this article.

Deception, Deception, and More Deception “It’s not a crisis, it’s a cover up!” This is the first and foremost lesson from the bank lawsuits. Sentiments like that concerning the financial sector and its inordinate influence on the federal government abound in social media, some academic circles, and paneled discussions before packed audiences. When a regional bank representative that funds an academic chair states, “We’ve been here before,” it should come as no surprise that business professors with an understanding of history roll their eyes in disbelief and contempt. You don’t need to be an economist or jaded to respond, “No kidding.” When it comes to understanding the financial crisis, a very real information war is being waged. Deception is used to create confusion, reshape a narrative, control perception, and thereby conceal the facts. Yes, it’s a cover up. The entire apparatus of academic preparation, managing public perception, the media narrative, and the legislative process is shrewd and cunning. Like warfare, it’s all based on many layers of deception. Industry publications, understandably, function as propaganda mechanisms to keep the morale up for rank-and-file employees. The academic world remains complicit in pushing failed academic theories and models as if they were proven facts. The mainstream media is complicit in misinforming the general public, which is easily manipulated for public support of misguided laws. Many high-sounding phrases were created to function as sanitized labels to conceal widespread fraud and predation. Appropriating these phrases did not change any

of the facts. Instead, these sophisticated-sounding phrases simply covered up the facts. Let’s consider just five. First, the financial crisis opened with former Goldman Sachs chief executive officer Henry Paulson as U.S. Treasury Secretary pushing the phrase “toxic assets” out to all of the media outlets. The mortgage bonds were not “toxic.” They were fraudulently originated and they defrauded investors. As a result, they were not assets. How were investors to be made whole? Taxpayer money, of course. Second, Ben Bernanke of the Federal Reserve blamed Asia for a “savings glut” as the reason for the housing bubble. In this absurd “debt is good” view of the world that can only come from the nation’s central bank—a perpetual debt machine—frugality and savings are a threat to the banks. Third, business-oriented publications like Business Week, Forbes, Wall Street Journal, and others promoted the phrase “mispricing of risk,” a concept more appropriate for academic journals and text books. “Mispricing of risk” was due to credit default swaps, which offset the risk onto others as insurance. The actual “mispricing” was due to the cost of buybacks as a result of fraud. Fourth, “regulatory capture” was used to describe the inordinate influence of banking executives within the fourth branch of government; a range of voices speaking in Capitol Hill testimony and other venues opted for a sanitized phrase rather than labeling this as political corruption. Fifth, corporations control both political parties, throw large amounts of money at law firms to shape bills that become laws, and at public relations firms to shape public perception. This is called “managing legislative risk” rather than fascism, which is what happens when the corporation controls the state. As we’ve all heard before, government is the handmaiden of business. Since deception is at the heart of all organized frauds, schemes designed to skirt regulation, and rackets designed to exploit the system, sometimes lawsuits come to play to put out the light. Consider Aaron Krowne’s ML-Implode.com, which was perhaps the first to archive and document the series of lawsuits against mortgage brokers and the banks. Krowne’s website was ahead of the curve and became the go-to-source for industry trends and the sordid details that characterize the nature of a legal complaint. Krowne’s efforts, which were often cited in the business and financial media, were met with frivolous lawsuits for the purpose of shutting down ML-Implode.com. TheNicheReport.com

Gaithersburg, Maryland-based AmeriDream, run by Christopher Russell and Ryan Hill, filed a frivolous suit against Aaron Krowne for the purpose of shutting down ML-Implode.com after a post appeared on that website concerning AmeriDream’s no-down-payment purchase scheme that placed the government at risk. Russell and Hill’s concerns were that ML-Implode.com pulled 100,000 visitors each day, and that the site served as an archive of legal complaints against lenders for the purpose of not letting anyone forget how we got into an economic mess. The two argued that their inclusion on ML-Implode.com harmed them. The fact, however, is that as noted in one of the motions, “The public benefits from the fruits of legitimate discussion ....”3 The business magazine Forbes labeled Russell’s scheme “a racket.” The definition of “a racket” is “an illegal or dishonest scheme for obtaining money.” Russell and Hill, however, did not file a libel complaint or demand a retraction from Forbes.4 When frivolous lawsuits don’t work to silence onlookers, then nondisclosure terms are used to keep out-of-court settlements forever in the dark. The fact is most complaints settle out of court prior to trial since it mitigates costs and permits the defendant to “save face” by not only burying many shameful details, but also including an admission of no wrongdoing provision as part of the settlement’s terms. This is part of the judicial process and is the way our system works. Settling cases out of court without admissions of wrongdoing serves the interests of corporations, not the general public.

Federalism and Its Discontents Federalism, the constitutional doctrine of preemption, and the judicial doctrine of standing are oppressive and destructive to freedom. Moreover, members of the federal government know how to behave like backward ignoramuses when they want. This is the second critical lesson from the bank lawsuits. The 20

May 2012

founding fathers were conspirators against the states and their citizens. And, we the people knew it. Though the newly freed colonists were able to negotiate a Bill of Rights as a concession by the conspirators, who wanted to create a federal government, no one anticipated too-big-to-fail banks or systemic economic risk of interdependent firms in a global economy, or the wanton greed for more profit that led to commingling deposit accounts with speculative accounts as in the case of MF Global. The federal government has served to protect the interest of national corporations at the expense of the states and its citizens, because that is what it was designed to do. The night after the filing of Robert L. Schulz v. United States Federal Reserve System, Ben S. Bernanke, United States Department of Treasury, Henry M. Paulson, Jr., and the United States, Paulson and Geithner waged a fear-mongering campaign through the halls of Congress. Paulson submitted a three-page bill that was ridiculed. Then, the shadow government— the unelected agency heads—pulled out all stops. On October 2, 2008, Congressman Brad Sherman (D-California) complained on the House floor about the orchestrated fear mongering and environment of panic that was clouding the better judgement of lawmakers. He said, “The only way to pass a bad bill is to keep the panic pressure on. Do not panic. Hold hearings. Let’s write this bill well.”5 Sherman’s comments about “creating and sustaining a panic atmosphere” ironically gave the U.S. Congress a taste of its own medicine when it signed the Patriot Act into law, which placed every American under possible surveillance in contravention to the Bill of Rights. Under the Patriot Act, one of the definitions of domestic terrorism is “to influence the policy of a government by intimidation or coercion.” The U.S. Treasury and the Federal Reserve catering to the financial sector did exactly that—they influenced public policy through intimidation and coercion.6 The House of Representatives produced a 100page bill, which the public did not want as evidenced

NMLS: 1652 EHO | EEO NR-5

by a meltdown of the Congressional switchboard: “All circuits are busy. Please hang up and call again.” Then, the Senate produced a 400-page bill, which was evidence of a backward process since that version came into law. On October 3, 2008, President Bush signed into law the Emergency Economic Stabilization Act of 2008, which should have been titled the No Banker Left Behind Act of 2008. Dodd-Frank, the Wall Street Reform and Consumer Protection Act of 2009, had no criminal provisions for further destroying the economy. In other words, the next time around no big bank executive will wear an orange jumpsuit with white socks and flip flops and then be handed soap on a rope as he is put behind bars. That is not going to happen. Civil offenses mean civil penalties. There will be no jail time.

Class Action Complaints Only Limit Liability Before the Subprime Meltdown of 2007 and the Panic of 2008, Roland Arnall of Ameriquest had institutionalized predatory lending. Though the fraud complaints came to the attention of the attorneys general across the nation, the entire lending industry followed Ameriquest’s lead. This was all driven by credit-scorebased target marketing and the “democratization of credit” with the goal of creating a customer base of ongoing repeat business. In any other business this would be fine. But, in mortgage lending where credit functions as a public utility, this is predatory. On January 23, 2006, attorneys general, prosecuting on behalf of their states’ citizens as well as lending regulators in 49 states and Washington, D.C., announced a $325 million class action settlement with Ameriquest.7 Ameriquest’s settlement per borrower averaged a mere $1,354 per claimant, which in some cases was less than the cost to file for bankruptcy and less than trustee fees that accrue in the foreclosure process. In some states the average award per claimant was less, given that each state had different numbers of borrowers and different loan amounts. 22

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Ironically, Ameriquest’s former employees were better compensated as part of separate suits against the company for not being paid overtime while with the company. The payout to settle the claims against Ameriquest amounted to roughly just a one point refund. The settlement, however, provided no relief for the loss of a home to foreclosure, bankruptcy, damaged credit, stressinduced heart attacks or stroke, or suicide. The settlement, moreover, did not take into account impediments that could take place in a job search if an employer required a credit check as a condition of employment. The settlement, finally, required no admission of wrongdoing. Then, the sordid details of the foreclosure scams perpetrated by law firms representing Fannie Mae, Freddie Mac, and the big banks made the news due to local journalists, not mainstream media reporters. Improper foreclosures, fraud on the courts, and the Mortgage Electronic Registration Systems business model made headlines. On October 13, 2010, the attorneys general from the 50 states announced a joint investigation into mortgage loan servicing and foreclosure fraud. They, however, did not call for a moratorium. Instead, they sought to determine whether or not the big banks had made fraudulent or misleading statements in court in order to secure the court’s permission to evict a homeowner in default. On that day, approximately 1.8 million foreclosure actions stopped in the judicial foreclosure states while 1.3 million foreclosures continued in the non-judicial foreclosure states. In the national pipeline, however, there were as many as 9 million foreclosure actions that potentially came into question as a result of servicers not exercising due diligence so as not to defraud the courts.8 The attorneys general from 49 states and the federal government then negotiated a $25 billion settlement with leading servicers to the financial sector’s benefit, because damages were arbitrarily capped. These banks have three years to locate and pay between $1,500 to $2,000 to approximately 750,000 families who wrongfully lost their

homes. This amount is about a few months worth of groceries, and that’s it. The problem for these families, which benefits the banks, is that many cannot be reached. Some are homeless, some are now living with extended family, some have left the country, and some have committed suicide.

Size Matters Industry-wide lawsuits warn that no company is untouchable. Consider Houston, Texas-based Allied Home Mortgage Capital Corp., a lender that boasted in its marketing pieces that “size matters.” This mortgage company at its peak had over 600 offices and functioned as the nation’s largest privately held mortgage company. Critics and analysts, however, charged that Allied was made up of net branches that existed to skirt government regulation. Like all mortgage companies, Allied Home Mortgage Capital Corp. pushed the envelope and sought opportunities to exploit grey areas in regulation. On November 1, 2011, the government filed United States of America ex rel. Peter Belli v. Allied Home Mortgage Capital Corp., Jim C. Hodge, and Jeanne L. Stell. Since this is a civil mortgage fraud complaint, there is no protection for Jim C. Hodge, the company’s chief executive officer, and Jeanne L. Stell, the company’s chief compliance officer. Due to the fraud allegation, the corporate shield of protection drops and these individuals must give an account. The complaint demanded $2.5 billion, or triple damages, stemming from the Federal Housing Administration’s payout of $843 million in losses. The government claimed that one third of Allied’s government loans originated between 2001 to 2010 went bad, which was evidence of “reckless mortgage lending, flouting the requirements of the FHA mortgage insurance program, and repeatedly lying about its compliance.” Between 2006 and 2007, the default rate on these government loans climbed to 55 percent, evidence that suggests the False Claims Act had been violated. Hodge had one of the company’s quality control operations set up as an off-shore corporation in St. Croix, and had only two quality control employees in the corporate office. Though Hodge collected management fees through this tax benefit scheme, he provided the government with fraudulent reports according to the United States Attorney’s Office. Moreover, Allied “falsely certified that none of its employees had been convicted of a crime and that it had a clean record in the states in which it operated.”9 In fact, Allied had employed convicted felons who had spent time in federal prison. In an email exchange between Stell and employees, she stated, “Serves

[Jim Hodge] right never listening and thinking he didn't have to play by the rules."10 Hodge, however, stated that the complaint against him and the tattered remains of his company was “so absurd.” This “last man standing” broker—Allied Home Mortgage Capital Corp.—may end up proving the adage ever true: the bigger they are, the harder they fall. After the details are covered up with hundreds of pages of counter claims and motions, the facts, along with the other deadbeat lenders, will be buried in the heap of the many other failures.

Concluding Thoughts Has anything really changed since the Great Depression? The financial sector’s drunken stupor from the gluttony of profit at all costs exists as an object lesson for all to see and understand what an “abomination that makes desolate” looks like. Like the Great Depression, the painful lessons from the many bank lawsuits will be closely examined for years by academics, law students, and some in the industry. Many, however, will choose either denial due to the need “to make a living” or “bliss that comes from ignorance.” The reality is nothing has changed for the better since the Great Depression. In fact, the legislative, regulatory, and judicial environments have worsened. As uncomfortable as it may be for Tea Party adherents on the political right to admit, the fact is the Constitution, as applied by the courts on behalf of corporations, has been destructive. The token gesture legislative remedies that are in Dodd–Frank to “correct” the excesses of preemption cannot undo the damage that’s already been done to America. Moreover, denying Americans access to judicial standing serves to justify those who believe that the government is corrupt beyond remedy, and that Thomas Jefferson was right—a revolution is needed every generation. Finally, the legislative process was meant to follow procedures that were circumvented during the Wall Street bailout hearings. That fact, along with the sideshow called the Financial Crisis Inquiry Commission that had no bearing on the legislative process, served to undermine the credibility of Congress. The many lawsuits are a windfall for law firms. Like it or not, without lawyers and a court system, there would be blood in the streets. But, there is no such thing as perfect justice. The reality is, justice is an expensive commodity, and those without adequate resources are automatically disadvantaged. For those “fortunate enough” to benefit from a class action victory, the victors in such actions are the attorneys. The math, not the decree, is evidence of this TheNicheReport.com

disturbing fact. Government policies are typically based on kicking the can down the road, but we’re approaching the end of the road. In other words, none of the policies, new laws, or court decisions have produced real solutions. Social unrest is growing as more Americans awaken from the stupor fostered by the mainstream media and corporate-oriented economics promoted in business schools. The Occupy Wall Street Movement is an expression of that awakening, though it provides no concrete solutions other than throwing bodies onto the mindless machinery called “the system.” What have we really learned? The American Dream of homeownership is based on the debt-based economy that feeds Wall Street at the expense of Main Street. We have confused debt with affluence and freedom. The many credit props pushed onto Americans at the expense of our institutions are required to produce home price runups, which have been viewed as sure bets for retirement planning. The many lawsuits in the aftermath of the subprime meltdown and financial collapse suggest that all of this was just an illusion orchestrated by a few and implemented by a network of useful idiots. As Frank Zappa once observed, “The illusion of freedom will continue as long as it's profitable to continue the illusion. At the point where the illusion becomes too expensive to maintain, they will just take down the scenery, they will pull back the curtains, they will move the tables and chairs out of the way and you will see the brick wall at the back of the theater.” All one has to do is look at the riot police ready to take out Americans deemed “terrorists” to understand that it’s all indeed just an illusion. Some still believe in coincidences. In 2012, the National Defense Authorization Act became law and the Department of Homeland Security ordered a half billion rounds of high-powered ammunition. The show is over. Hit the light switch. That “brick wall at the back of the theater” is the rumored 100-year charter of the Federal Reserve, which may in fact be perpetual.

Peter Hébert is a mortgage finance and real estate industry subject-matter expert with a master of business administration degree in finance and marketing from Mount St. Mary’s University in Emmitsburg, Maryland. Hébert runs Freedom House Press and is the author of Mortgaged and Armed (Freedom House Press, July 2010), which is available on Amazon.com. His upcoming book Death by Banking (Freedom House Press) was completed in September 2011 and will be available in 2012. He can be reached at PeterHebert@ verizon.net. 1

The Mortgage Litigation Index is a measure of legal complaints against the banks, but downplays the actual number of complaints given that just one class action claim is a consolidation of hundreds or thousands of complaints.

“REAL ESTATE APPRAISAL SERVICES FACING MORE LAWSUITS,” Foreclosure Deals, April 19, 2010.

CHRISTOPHER M. RUSSELL, ET AL. vs. ERIN KROWNE, ET AL., TRANSCRIPT OF BEFORE THE HONORABLE DEBORAH K. CHASANOW MOTIONS HEARING UNITED STATES DISTRICT JUDGE, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND SOUTHERN DIVISION, NOVEMBER 11, 2008.

Asher Hawkins, "Going Tribal," Forbes Magazine, August 7, 2008.

Brad Sherman, “Testimony on the Bail Out,” United States House of Representatives, October 2, 2008.

Excerpt from Peter Hebert, Predator Nation, Freedom House Press (Pending Release).

The 55-page settlement is posted online in a PDF format at the Ameriquest Multistate Settlement website. See vwww.ameriquestmultistatesettlement. com/index.htm.

Excerpts from Peter Hebert, Death By Banking, Freedom House Press, September 11, 2011.

"MANHATTAN U.S. ATTORNEY SUES ALLIED HOME MORTGAGE, CEO, AND EXECUTIVE VICE PRESIDENT FOR FRAUDULENT LENDING PRACTICES CURRENTLY ASSOCIATED WITH $834 MILLION IN INSURANCE CLAIMS PAID BY HUD," UNITED STATES ATTORNEY’S OFFICE, Southern District of New York, November 1, 2011.

11 All of the central banks were created as an act of Congress. There are rumors floating of the third central bank’s charter coming for renewal in 2013. The author’s call to the Federal Reserve’s public affairs office tentatively confirmed that unlike the first two central banks, the Federal Reserve has “no charter.” But, the public affairs officer at the time of this writing could not provide any documentation or citation of the act or amendments to the Federal Reserve Act of 1913 to support her statement of the “perpetual” nature of the Federal Reserve.

Going to Closings The sure way to develop new business

by Ralph lovoulo

“

hat are you doing here?” There it was again, the question I loved to hear. It was posed by the buyer’s attorney whom I had met at a mortgage showcase about a month before. On this particular day, he looked up at me as I walked in the door as if I were an alien from some faraway planet. His quizzical look, followed immediately by that surprising but not shocking question, was a reaction I was not only used to hearing, but embraced with fervor. The query had been posed to me so often that I was unusually ready with some quick retort. But, as I worked my way past the bodies seated at the closing table, I resisted any attempt at humor. I knew the attorney was a serious person, not prone to having amusing conversations; at least that’s been my experience so far. When we met at the showcase, we had been introduced that night by a member of the staff of the state banking department. I knew his reputation as a knowledgeable and integrity-filled attorney, but somehow we just never seemed to cross paths. Additionally, the night of the showcase, we didn’t really get to spend much time together. He was not on my target list that night. As he turned to tell his clients that we had recently

met, my mind reflected upon the many times I had been to a closing; how often I had told my sales reps what the advantages are, and what would usually be said when they walked in the door. Most often, when I go to a showcase, I do so with the intention of meeting certain people. I’m pretty focused on my goals. Those goals don’t leave me much time for chit-chat. I usually want to meet a specific number of people, usually three to five, and sometimes even specific people. My intention is to engage them in conversation, get them interested in my business philosophy, ask a pointed question (“would you be interested in growing your business?”) and then specifically state that I have ideas that can help them do just that. The night I met this attorney, he was not one of my targets. He would be approached some other time. “I go to all my closings. It’s one of the best things I do to develop new business.” This was said in such a voice that everyone in the room could hear me. Today, since I was the last one there, the listing and selling realtors were already sitting. Of course, my clients, the applicant/ borrowers, had been told by me on the day we met that it was a practice I always exercised. My explanation of the need for me to show up at the closing was simple, at least to me. If I do the right things during the process of the application, then I want to be there for two things: when TheNicheReport.com

you leave the closing table and you say “thank you” to me, I want it to be sincere; and secondly I want the others in the room to see my face, be able to ask me questions so I can help them accomplish their own goals. I also had brought with me 10 letters and envelopes to use as my specific marketing for closings. When I received the verbal approval for the closing of the loan, I called the borrowers. As was my habit, I also asked them to bring the names and addresses of their 10 closest family members and friends. When they asked me why, I told them I would produce a special letter for them to send to that list of people. The letter is very simple, it says that the buyers are very proud of their new home, and they wanted to share their delight with the addressees and let everyone know how happy they were with the service that had been forthcoming from the realtors® and the Loan Officer. So I had prepared the ten letters, by putting the name and address of the new buyers in the upper left hand corner of the envelope. I had also included in the letter the names of the two realtors involved along with their respective contact information, plus my personal contact information. The letter said, in effect, that the buyer is so happy with their new home they wanted to share a photo of the home with everyone. Oh, I forgot – it was also necessary

to include in the envelope a photo, easily copied from the appraisal. So, as I often do, I ask you to think of this, “who wins with this strategy?” And then I’ll tell you, “everyone!” The realtor® wins because the Loan Officer has created a marketing strategy for them. The borrower wins because they get to thank everyone involved in their transaction who did something they could never do for themselves. The Loan Officer wins because they have established a closer relationship with everyone in the transaction. Then the final question is, “What is the cost?” – “Almost Zero!” Is there any reason why you wouldn’t do this? If you need the procedure, just ask me, I’ll send it to you for free. Ralph LoVuolo is Sr. President, Mortgage Motivator, a consulting firm on the cutting edge of the mortgage business to help people achieve their true potential. LoVuolo Sr. is one of the founding fathers of the New York Association of Mortgage Brokers and a two-term president. Additionally, he served as Parliamentarian for six years on the Board of Directors of the National Association of Mortgage Brokers. LoVuolo, Sr. can be reached at ralph@mortgagemotivator.com, or visit him at http:// www.mortgagemotivator.com

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Web 2.0 Marketing Secrets for Mortgage Pros Secret #5: Use "Consumer Tip" videos to explode your referrals

BY doren Aldana

n last month’s article, I showed you how to convert your Realtor® "fans" on your Facebook Fan Page into loyal referral partners who send you all their referrals. Now, in this final article of the series, I'm going to teach you how to use helpful "Consumer Tip" videos to capture more repeat and referral business from your database of past clients. This is one of the most powerful, cost-effective ways to mine the GOLD from your database, without having to pay a single penny for postage. Remember, it costs five times more to acquire a new client through conventional advertising than it does to acquire a referral or repeat transaction from an existing client. At this point, if you've been following along in this 5-part series, you should already have a Facebook account and a "Realtor® Tips" fan page set up. If you haven't done that yet, watch my video tutorial at www. done4uvideomarketing.com/agentfanpage. Now let's get started... 28

May 2012

Once you complete those prerequisites, the next step is to set up your Consumer Tips Fan Page. This is a unique page for marketing your mortgage business on Facebook. It will allow you to build a following of fans who "Like" your mortgage business. Here are a few examples of possible titles for your page: • John Smith, Vancouver Mortgage Agent • John Smith, Vancouver Mortgage Consultant • John Smith, Vancouver Mortgage Broker • John Smith, ABC Mortgage You get the idea. Just make sure your title has your name and/or company name and tells people what business you are in. You'll want to add your logo, photo or custom-branded banner to the page. Now that you have your Fan page set up, the next step is to deliver killer content that engages, entices, and magnetically attracts your ideal clients. The primary objective of your content is to build a following of "Fans" that know you, like you and trust you because of all the valuable stuff you're sending them. If you do this right, when the time comes that they need a mortgage – BOOM! – you'll be the first person they think of because

you've cultivated goodwill and top-of-mind consciousness. First you gain mindshare, then heartshare, and then ultimately, walletshare. What kind of content should you post? Here are a few ideas to consider: 1. Mortgage trends and real estate news â&#x20AC;&#x201C; but not too often. When there are significant changes to rules, regulations or rates that impact the consumer, by all means let people know so they don't miss the boat on a timesensitive opportunity. However, don't hit them over the head with the same old mortgage stuff too often or you'll bore your people to death. 2. Homebuyer tips. Teach people how to avoid costly mistakes, ways to save money, steps to take, etc. These can be "evergreen" tips with perennial value to homebuyers. Again, this isn't something you want to talk about too often. Statistics show that people refinance or buy a home only once every three to five years. That means this "homebuyer" content will only be relevant to people once every three to five years. 3. Homeseller tips. This is where you teach people how

to sell their home faster for top dollar, how to stage their home, how to have more curb appeal, how to attract more quality buyers, etc. Your RealtorsÂŽ will love this stuff too! 4. Home maintenance tips. For example, you can provide tips on landscaping, setting up irrigation, house painting, home renovation, etc. 5. Recommended resources. This is where you can endorse your referral partners and invite your "fans" to take advantage of a free analysis, free report, or a free consultation that your referral partner is offering. For example, you can promote a "free home evaluation" from your RealtorÂŽ, a "free financial analysis" from your financial advisor, a "free consultation" from your home stager, etc. 6. Funny stuff. I call this edutainment. While you're educating them, you want to entertain them. The highest paid people in the world are entertainers. Look at Oprah; she is the richest, most powerful female on the planet because she knows how to entertain people through her personality and her engaging and entertaining interviews. Entertaining people is where all the magic happens! There are lots of fun ways to entertain people on

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May 2012

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Facebook – cartoons, funny images, funny videos, etc. Again, just be careful that you don't overdo it. Whenever possible, try to dovetail the content in with what you do, so that it's congruent with your brand and what you're trying to accomplish. 7. Ask questions that encourage interaction and feedback. This is a great way to create relationship and connection, and have people feel like they know you, like you, and trust you, and want to do business with you. Seek first to understand, then you will be understood. Now the question is, what's the most powerful content format to use? Should it be plain text, video, audio, images, or something else? As I mentioned in my previous articles in this series, the most powerful, effective media to use is VIDEO! Please refer to my second article in this series for more info on the software and equipment you'll need to create low-cost, high-impact videos. Here are a few video platforms I recommend using for posting your "Consumer Tip" videos with maximum impact: 1. "Consumer Tips" Fan Page on Facebook. Your fan page provides you with an awesome video player that allows videos up to 20 minutes long. There is an immense amount of video played – and shared – within Facebook at any given moment of any given day. And because of this viralnatural effect of Facebook, it is a really powerful platform for sharing your videos. 2. "Consumer Tips" Blog. The cool thing about posting videos on your blog is that Google loves blog content, especially video, and if you do it right, you can get loads of free traffic from people searching for mortgage info in Google. This involves posting your articles and videos to your blog on a regular basis (ideally once per week) and then coding your content with the right title tags, description tags, meta tags, etc. Once that's done, you

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create "backlinks" by submitting your articles and videos to blog directories, article directories, bookmarking sites, etc. Backlinks are indexed pages that have links pointing to your site, in this case your blog. In general, the more backlinks from relevant sites, the higher Google will rank your site and the more free traffic you'll receive. For example, if you live in Toronto, and you're a mortgage broker and your video is coded with "Toronto Mortgage Broker," Google is going to search that and file it inside its enormous database using a complex algorithm. When people start searching for "Toronto Mortgage Broker," your videos will start coming up because Google loves video and loves blogs. So you definitely want to start posting your videos and the transcribed version of each video on your blog. 3. YouTube Channel. I used to say that it's not good to post videos on YouTube because after someone watches your video, YouTube will often recommend that they watch related videos from your competitors. However, I recently learned that if you setup a YouTube channel you can get people to subscribe through an RSS Feed, which basically means that when you add a new video to your channel, anyone who subscribes to it will get notified that there's a new video, and they can watch your video without any of your competitors' videos being recommended. Once you have your social media platforms set up (YouTube Channel, Fan page, LinkedIn, Twitter, Blog, etc.), it's a good idea to add a "Follow Me" section on your Blog with icons representing each of the social media sites you're connected to so people can start following you. Remember, the bigger your following, the bigger your bank account! So there you have it. I've just given you several ideas you can use to start increasing your profits using the power of video and social media. Now it's time for you to take action! Just do this stuff! Doren Aldana is considered by many to be the nation's leading Mortgage Marketing Coach. Since 2005, he has been dedicated to helping mortgage professionals attract more clients with less effort, regardless of market conditions. Among Aldana’s latest innovations is a completely done-foryou video marketing solution that allows you to instantly deploy powerful videos through social media that attract mortgage clients like crazy. To see a free demo, visit: www. Done4UVideoMarketing.com

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Communicating with Buyers Keep All Parties Informed During the Closing Process

BY Leif Boyd

uying a home is one of the largest commitments an individual or couple may ever make. It is a highly energized time period that involves much more than just buying the home. First, many buyers have looked at dozens of homes before deciding on the right one. Second, they have to make an offer that may or may not be accepted by the seller. Third, they may need to consider selling or renting out the home they are currently in. Fourth, they need to buy furniture and decorations while considering paint colors and landscaping. Finally, homebuyers need to be approved for a home loan and that loan needs to be ready to go when the home is. All of these points, combined with a market full of first-time homebuyers, create the perfect storm for a stressful home-buying experience. As loan originators we cannot control every factor for the home buyer; however we can help to alleviate some of the stress and unknowns when it comes to being approved for a loan. 34

May 2012

Keep All Parties Informed During the Closing Process With so many individuals and companies involved in the home-buying process, it is important that someone take the leadership role. Although the homebuyer knows most of what is going on, it is difficult for them, especially if it is their first home, to know what to expect. It is a good idea for loan originators to keep track of everyone involved throughout the process. Make a list including client contact information, contact information for all realtorsÂŽ involved, the title and escrow companies and anyone else pertinent to the transaction. Knowing everyone involved will help the loan originator keep track of all moving parts, allow questions to be answered in a timely manner and help move the process along on schedule. During each phase of the loan process itâ&#x20AC;&#x2122;s important to keep the buyer and their real estate agent(s) informed on what is happening, what information is needed from them and what the next steps are. One to two weeks before escrow is scheduled to close, ensure that the loan is on schedule to be fully approved and funded, and make sure the buyers know the escrow process, what to expect

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and when. Work with their agent to answer questions they may have and work with the title and escrow companies to make sure everything is on schedule to close from their side. In the last few days before escrow closes, be in constant communication with the buyer, real estate agent(s), escrow officer and title company to ensure all documents are ready to be signed and the house will close on time. Nothing is worse for the buyer and loan originator than having a home in escrow that takes longer than expected. This delays the buyer’s entry into the home and could result in the loan originator having to get additional information from the buyers (new paycheck stubs, bank statements, etc.).

Keeping the Buyer Engaged Being in constant communication with buyers is one of the most important things that a loan originator can do. Pushing out information to buyers, their realtors® and others involved helps alleviate stress, ensures they know what is happening behind the scenes and gives them the opportunity to ask questions throughout the process. Make a habit of updating everyone on Monday, Wednesday and Friday, or Tuesday and Thursday. Set aside an hour to call, give a quick update, see if there are any questions and get any additional information needed for the loan. Calls are the best way to do this. Loan originators are able to pick up on verbal cues and concerns that buyers might have. Although calls are best, especially when communicating with the buyer, emails can also work if there are a lot of people within the pipeline, but it is important that the loan originator verifies that the email was received, especially if there are action items within the email. If the loan originator does not have time to call and follow up regularly, it can be done by an assistant. If there is no new information to convey, it is still important to make contact and say that there is no new information; however “The year I started doing the Lender Letter and the eWeekly Economic Update, my business DOUBLED. Thank you for your excellent products and service.”

See for yourself! Steve Peterson Sierra Pacific Mortgage

rightsidemarketing.com ~ 800.456.4395

as soon as new information becomes available, they will be contacted. Proactive communication from the loan originator will put buyers at ease and help loan originators to keep the loan on track. Regular calls are especially important at key milestones throughout the loan process. These milestones are: PreApproval, Appraisal Ordered, Appraisal Complete and Filed, Conditional Approval, Final Approval, Documents Ready, Signing and Funding. Each of these calls should be made immediately, even if the loan originator just talked to the buyer a few hours before or the previous day. Each milestone could bring about a new question from the buyer, and provides an excellent opportunity for the loan originator to ask for referrals. One of the best tools for expanding a loan originator’s business is referrals. Happy, well-informed buyers will gladly share information with their friends, family and co-workers about the experience they had with their loan originator. Buyers will share information with everyone in their personal and professional networks – it can happen in person, at lunch, at a backyard BBQ, at church, over the “water cooler” or through social media sites like Facebook, LinkedIn and Twitter. Remembering to proactively ask for referrals will help grow a loan originator’s business. The loan originator’s overall communication will help create a positive experience for the home buyer, even during tough transactions. Having a proactive communications strategy is one of the most important aspects of building a business through referrals that can come from anyone involved in the process, from a title agent to buyer to real estate agent. All of these individuals have a significant stake in helping a loan originator’s business succeed, and they are more likely to refer future buyers when they know how simple a good loan originator made the process for them. Everyone involved in the process will talk about their loan originator, and what they say is determined by the loan originator’s actions throughout the process. Since joining American Pacific Mortgage (APM), Leif has taken an active role in overseeing all aspects of mortgage origination including the responsibilities of business development, oversight of the production department and APM’s 112+ branches. For more information about American Pacific Mortgage and the services it provides, please contact Leif at lboyd@apmortgage.com or (916) 960-1325. (NMLS# 225906)

A Great Crew Makes the Voyage Successful Don't let technology ruin you by chris jones

ver the years, I’ve been at several mortgage companies, and formed lots of different businesses. I’ve never been a superstar. My production has always been good enough to support a staff of five or six, and a family of eight, but I don’t do that in Los Angeles or New York. I live in Lehi, UT, and it’s relatively cheap here. I have managed to produce an annual six-figure income while writing books and running film festivals and being the President of the Rotary Club, and things of that nature. I may not be on the shortlist of top producers, but I live pretty well and pretty simply. There’s a key to doing this, which I’d like to share with you this month. It’s not me. It’s them. I have fantastic support. It’s the secret to my success (and that of most others). There are three arenas where good support is crucial. One is in your office. Two is in the corporate HQ. Three is in the home. If you’ll

forgive some personal experiences and references here, I’ll explain.

The Office Squad Jill is my office manager. She’s an old friend, someone I first met 25 years ago. She lives close by. She is a trusted associate in every area of my life. There are, of course, a lot of different ways to arrange this, and some people prefer to have their lives compartmentalized and their relative assistants in each compartment. Do it your way. But for me, if my life touches it, Jill has an eye on it. Today, for instance, she researched a new CRM system, uploaded credit documents to the reporting company, answered the email of one of our loan officers who is out of the office, and purchased and had delivered to my house 12 bales of hay. That was by about 1 o’clock. Those are the things I know she did because I asked her to. There are, I am certain, another hundred things she did that I did not ask her to do, and that she is doing right now because I am barricaded in my office on TheNicheReport.com

deadline for this article. If you’re going to be efficient and effective, you need a Jill. And a Jason (my loan coordinator). You need someone who does all the things you do not get paid to do, but that you won’t get paid if you don’t do. Credit disputes, rapid rescores, chasing down IRA paperwork, IRS documentation, all the way down to coloring with children while the parents concentrate on deciding between FHA and conventional. It is possible to do all these things by yourself. It is also exceptionally unwise. As loan professionals, we get paid to do loans. The part of that that cannot be done by anyone else you should do. Anything else should be done by someone else. There aren’t any good exceptions to this. Get someone that you trust to handle those things, and pay them whatever you have to. It will be worth it, this I swear.

The Team at HQ There’s a lot of moving around going on in the industry, from company to company and broker to banker and so on. I get calls, the same as everyone,

How we see it

asking me both would I take people on, and would I like to go elsewhere. I listen to everyone, because it makes writing this column easier, but I’m not going anywhere. There are several reasons for this, but the big one is that I love the people I have behind me. It’s impossible to overstate the importance of this. When you do a brilliant job of selling a loan to a client, and then it goes sideways because the people processing or underwriting or funding your loan don’t do their jobs, you’re going to lose the referrals from that loan, at the least. Over time, if it happens often enough, you’ll be down the road kicking a beer can, as my father puts it. You have to be able to count on the people you work with to do their job at least as well as you do yours. More than competence, though, is personality and commitment. An example. We were having some trouble with a financial issue relating to our new office. Some of the reimbursement was hung up in procedure and it was putting some strain on our bank account. We complained a little in an email to someone that didn’t even have responsibility for the problem, and the next morning the COO of the company and the district manager of the area were on my doorstep. Not on the phone –in my office, in person. Sam and Sherri drove to my place and personally made sure I understood that they were going to get the problem fixed (it was, instantly) and that if I ever had a difficulty like that again, that I could call them immediately and they would take care of it. But I heard something else, too, something even more important: you, and your team, matter to us. That was worth a lot more to me than money. Most of the movement I see from company to company is loan officers chasing rates and programs and pay. I’m not saying there isn’t some legitimacy to that, but I want to make sure I say this: most of the time those things don’t matter long term. What matters is working with people that have your back. If you don’t have those people, no rate or program is going to make up for it. If you do have those people, then almost always, moving on will make things worse, not better.

Home Sweet Home My Jeanette and I have been married over 20 years. She’s been there for the failures and the successes and the heartbreaks and the celebrations. She’s held down the 38

May 2012

fort when I closed loans in the middle of the night, and sat with me when skyrocketing interest rates forced me to lay off most of my staff. She is a woman of quiet advice and great strength. No one could ever be more fortunate, when choosing a companion, than I have been. Now, it’s a two-way street. She knows everything she cares to know about the business, and she sees the books and the payroll and the whole crazy thing. I know that living with a loan officer is sort of like being in the passenger seat next to a drunk driver, so I make sure it isn’t also like sitting there with a gag and a blindfold. Your support people at home, whoever they are, are every bit as entitled to your trust and confidence in business matters as your business associates are. If you forget this, you’ll lose that support. It’s that simple. I don’t ask Jeanette to take on faith that I’m working; I show her the reports. We discuss the branch goals before I even talk to the people in the branch. She is my partner in all that I do. It doesn’t make everything all better. It does make everything better than it would be otherwise. That support, at the end of the day, is worth more than any

deal, and more than any success we could have in any venture. Do not sacrifice it for anything. To thrive in this industry, as besieged as we are from all quarters, takes skill and determination and nerves of steel. But it also takes help. Get the right people, and they’ll get you where you want to be.

Chris Jones is a branch manager with City First Mortgage Services and a ten-year veteran spanning the best and the worst of times in the industry. He is the author of the book Even Your Mother Won’t Call You Back, a primer on how to use the Six Channels of Marketing to do business more naturally and efficiently (available at www. iamchrisjones.com). Chris arrived in mortgages after careers with tech startups, stockbrokering, and running a presidential campaign. He’s a sought-after speaker and a part-time opera singer, which he insists isn’t as impressive as it sounds. Chris and his wife Jeanette live in Lehi, UT with their eight children. He can be reached at 801-850-3781 or at chris@ lehimortgages.com

The Key to Success in a Compliant World Know the motive behind the regulation by Todd BAllenger

nderstanding current regulatory changes – and the motives behind them not only aids in your ability to stay compliant; it also strengthens your position or the positions of your loan originators and creates a significant advantage over your competitors. Constantly shifting regulatory sound bites impact every aspect of the lending industry today. We often focus on the details of what we need to do to remain compliant as new bills are introduced, and lose sight of the motive behind their creation. But if you investigate and understand the motive, then the regulatory bills themselves begin to make more sense. The Consumer Financial Protection Bureau (CFPB), for example, provides very telling hints of where the mortgage industry is headed and what mortgage companies and loan originators need to do in order to evolve with the industry.

Consumer Financial Protection Bureau What’s the motive? If you look at the heart of the 40

May 2012

CFPB, it’s all right there in the name. Their website states: “The central mission of the Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards or using any number of other consumer financial products.” This incredibly well-funded government organization was founded on the basic idea that consumers are not smart enough to make good financial decisions. They need a great deal of protection for themselves, and from themselves, in addition to protection from industry predators. Some level of protection is a positive thing, as this type of oversight has been in place in the financial services industry for many, many years. It was simply a matter of time before a Mortgage-Backed Security sale was actually treated like a security sale from a regulatory perspective. Clearly, the main focus of the CFPB and other parties within the regulatory environment is on mortgages and credit cards. This is why we have the three-sided balance sheet. Traditionally, we think of assets and liabilities as being the two sides of the balance sheet. What’s the largest single asset for most consumers? Their house. It’s the

biggest single asset on their balance sheet. What’s unique about that asset? The house is rarely an asset uncoupled from an associated liability, a mortgage. The mortgage is the largest single liability for most consumers. The house is really an asset in name only; the house may be worth $200,000, but if we have a mortgage liability of $200,000, we actually have a net asset that is worth $0. As such, we propose that real estate is the third side of the balance sheet. Why is that important, and how does that speak to the motive at hand related to compliance? At the end of the day, real estate is both an asset and a liability for all balance sheets. Even if you own a piece of real estate free and clear, it requires taxes and insurance and other expenses that create a liability. Since 1985, we live in the FIRE Economy, an economy where finance, insurance and real estate outstripped manufacturing as the largest provider of gross domestic product – an economy of tremendous wealth circulating through the hands of consumers influenced by three very large industry groups: financial advisors, mortgage lenders, and real estate agents. Testimony before Congress stated that much of the crisis stemmed from a lack of consumer education, and that only one industry group provided guidance to the consumer as a basis of fact. Financial advisors were selling financial products, but first and foremost they were advising consumers. Mortgage loan officers weren’t advising consumers, they were merely selling products. Real estate agents, who may be the next industry group to go under the microscope, were also focused on selling products, they were not advising clients. Whether you agree with this or not, Financial Advisors were considered advisors; Lenders and Realtors® were considered sales people.

Protecting the Consumer If a large national group of consumers gets hurt, in a way that cripples the very fabric of our society; then you have to protect the consumer from the sales people that are selling them things that may not be in their best interest. That’s the view of policy makers today. The CFPB and other groups, legislation, and future laws will support and mandate that Lenders (and eventually real estate agents) work in the best interest of their clients. What exactly does that mean? The dynamic of putting the client first is often based on eligibility versus suitability. When a prospective client comes to a financial advisor with $100,000, the advisor rarely thinks in terms of yes or no, but where? They must

focus on suitability of the investment. The “yes, I’ll work with you,” or “no, I won’t work with you,” is something you’ll also want to consider, but assuming the $100,000 is available, you have to decide what is the most suitable investment for this person to meet their longer-term goals. These goals are often expressed as safety (how much risk they can handle), liquidity (when might they need this money) and return (how much interest can they earn). These goals are often at odds with one another: the product that has the highest return might have the highest risk, and then we must figure out whether return or safety is more important to the client. That is a conversation based on suitability. The client may be eligible for any investment, but what is suitable for them? That is how the advisor is held to a higher standard. Lenders will have to learn to think more like financial advisors. Lenders traditionally focus on the yes or no. “Yes, I’ll work with you if I can get you a loan.” “No, I won’t work with you if I can’t get you a loan.” To firmly instill suitability into lending culture, we see the bull’s eye shrink as Fannie and Freddie and other lenders dramatically reduce the criteria through which they would purchase a loan. That impacts your behavior so that you have a smaller product set to work with, and further protects the consumer from loans that might be unsuitable for them. Let’s look at a practical example. An 80-year-old woman with no living spouse has $250,000 as her entire retirement savings in a CD. She wants to earn a higher return and an advisor says “Yes, I’ll work with you,” and proceeds to put her money into an ‘oil and gas’ partnership that has the potential to pay out 12% annually. This advisor has most likely violated the suitability requirements of his profession (and legally as well), because he should know that while that return is possible, he must also consider the safety and liquidity of the woman’s money, even though she just wants a higher return. Should the advisor place all her money in an ‘oil and gas’ partnership, which is very speculative by nature? Her total savings could be lost. She might not have any access or control of her original principal in an emergency. In court, the advisor will most likely lose every time if he didn’t show her other examples, and document in a presentation the ‘why’ behind his advice. This seems obvious, but what if a young couple buying their first home wanted the lowest rate? Would giving them a 1% negative amortizing loan meet that need? Sure. The needs of lowest payment were met, but what TheNicheReport.com

of their other goals for safety and liquidity? Did they put down too much? Were they clearly aware of the payment risk over time? Essentially the eligibility of what you can do for a client is far less than it used to be, and the ultimate game will be played out on the basis of suitability – and your ability to communicate that to your client effectively.

From regulation to opportunity The real opportunity of the current environment is to learn as a lender to incorporate suitability into your business to keep pace with the growing mandates. If you realize that your business is going to look much more like a financial advisor’s business, you’ll have a leg up. Here are a few action items to get you started: • Go visit two or three highly respected financial advisory firms in your local market. Take a camera and ask if you can take some pictures, meet with advisors and interview them about their business philosophy. Learn to think more like an advisor and upgrade your perceived value in your market. • Think suitability first, eligibility second. What’s the right product for your clients based on their need for

safety, liquidity and return? What would help them sleep well at night? What’s the most important consideration for them when they buy or refinance a mortgage with you? • Learn to present like a pro. Financial advisors understand that a compliant sales presentation is critical to their success. It keeps them out of trouble, and helps them communicate the value of their advice at the beginning of the process. If a client engages, then they do the heavy lifting of all the paperwork, but not before the client is sold and ready to move forward. Lenders can profit from this experience, learning to make a compelling presentation based on both eligibility and suitability that eliminates your competition, providing you a higher return with less risk, and greater personal capital to invest in your future. You are more regulated now than at any time in your history. There are many opportunities to learn from other industries. Real estate agents will deal with this more in the future, but you must deal with it now. Create a real win/ win by helping your clients understand all their choices in a way that helps them meet their current borrowing goals.

Free resource Learn more about compliant loan presentations that satisfy disclosure rules, boost conversion rates and raise client retention rates and revenue per closing: register for a free 21-day membership to the ultimate loan presentation system, MSS Borrow SMART Analysis, at: www. mortgagesuccesssource.com/go/mssbsa or call (800) 9631900. Todd K. Ballenger, CEO, KendallTodd, has 23 years experience in the financial services industry as a licensed securities, insurance, real estate, and mortgage lending professional. Todd founded three companies: Capital Savings Co, Inc., Advantage Capital Mortgage, USA and PlanMax Financial. These three companies closed over $2 billion dollars in residential and commercial loans before being rolled into a Nasdaq IPO in 1999. Todd is considered an industry pioneer in the area of capital market and credit market convergence, and has published courses on lending and equity management currently approved for Realtors®, Appraisers, Builders and Lenders in over 42 states. Todd was a two-time Inc. 500 winner, a three-time KPMG Fast 50 winner, and the 1998 NC Mortgage Lender of the year. Todd was awarded the 2003 '40 Under 40' award by the Triangle Business Journal in NC as one of the top 40 young leaders. Todd can be reached at toddb@kendalltodd.com

center stage

Center Stage with In touch today The niche report

Many mortgage professionals think marketing is optional. It’s not! Find out why . . . In Touch Today provides Real Estate Marketing that works. Did you know that over 71% of all Real Estate and Mortgage transactions are generated by repeat and referral business? According to Gwen Buehler, Marketing Manager at In Touch Today, “the biggest mistake mortgage professionals make is thinking that customers will remember their name after they close on their loan. The best way to ensure past clients remember, refer and become repeat business is by keeping in touch frequently with content that the customer will find useful.” In Touch Today, a 12-year old mortgage marketing company, has developed a range of direct mail, email, and social media products that mortgage professionals can use to keep in touch with their clients, prospects and referral sources. The Niche Report sat down with the team at In Touch Today for an in-depth Question and Answer session about why marketing for mortgage professionals really is not optional. What does In Touch Today provide? In Touch Today provides marketing solutions for mortgage professionals. We know mortgage professionals have to constantly stay in front of their clients. We also know that mortgage professionals have limited time and budget to market. Therefore, all of our solutions center around three key principles: (1) provide valuable content to our mortgage

professionals’ customers on a frequent basis; (2) take very little of our customers’ time; and (3) be affordable. Many of our successful clients send their customers monthly postcards or newsletters. Every month we produce a new Recipe postcard, Home Tips postcard and Lender for Life postcard, and three new newsletters with fresh, industryspecific content. Our goal with each marketing piece is to provide information that people find valuable enough to keep, and remember that it came from you. While our roots are in direct mail, we also offer a choice of email newsletters that we deliver to our clients’ customers. We handle everything from creating the content and design to sending the email. Our newsletters can also be customized TheNicheReport.com

center stage with content from our clients. Our specialized Mortgage Matters provides high-quality mortgage information for referral sources such as real estate brokers, lawyers, title companies, etc. on a weekly basis. Finally, we offer a variety of affordable prospecting campaigns that include both data lists and targeted direct mail or email products. One of our most popular prospecting campaigns involves targeting a specific neighborhood and sending residents a postcard announcing a neighborhood deal closing. This is a great way to capitalize on a closed deal. What makes In Touch Today different from other mortgage marketing companies? We consider ourselves as marketing partners to our clients. We have been doing mortgage and real estate marketing for 12 years, and 100% of our clients are mortgage and real estate related. Over 15,000 mortgage and real estate professionals work with us. Because we are 100% mortgage and real estate focused, we also make it a top priority to stay educated about industry news that affects our clients. When new loan programs become available, or when interest rates drop, we are quick to respond by creating marketing products to keep our clients in front of their clients FIRST with important industry information. We will always make sure our clientsâ&#x20AC;&#x2122; marketing efforts take advantage of both industry and general technology trends. We also have a very extensive marketing education center on our website which includes over 1,000 pages of mortgage and real estate marketing information and various resource worksheets. We even provide presentations that mortgage professionals can use when they are in front of their clients. Our goal is to help our clients successfully market. Finally, we offer a complimentary one-hour marketing consultation for any mortgage professional to help build the perfect marketing plan for their business goals and budget. What is the most effective marketing product at In Touch Today? Before we reveal the most popular product, it is important to understand that the most effective marketing product is ANYTHING that is sent consistently to your database. As long as you are sending something, ideally each month, your marketing will in fact be effective. The most effective marketing product is our Recipe postcard. Love them or hate them, this marketing piece has been used by our most successful clients in the mortgage industry for 12 years. We have over 3,000 products to choose from to build the perfect marketing plan, including both 44

May 2012

print and digital marketing products. We are also excited to now offer social media campaigns for our clients. We will build a social media presence for clients and update their page daily with a home tip, travel tip, financial tip, recipe, etc. This is a great way for our clients to reach their database on a daily basis using social media while also attracting new potential clients. Who is your typical customer? Simple â&#x20AC;&#x201C; every mortgage professional who wants to grow their business. Whether a mortgage professional has been in the business for 30 years, just starting out, part of a small office, or a team member at a large mortgage company, they are a perfect candidate to grow their business working with In Touch Today. Do you have marketing solutions for mortgage professionals on a tight budget? We realize everyone is on a budget, and that is why we have products to fit every financial situation. We have monthly email marketing products available for as little as $35 per month that will contact every single person you know - past clients, prospects and even referral sources. Our Digital Newsletters and Mortgage Matters products are a great way to start marketing to your databases(s) immediately. Also, direct mail isn't as expensive as you might think, either. Did you know you can send out a campaign of 100 postcards, personalized, addressed and mailed for you for under $100? The beauty of In Touch Today is that you have complete control to choose the perfect marketing product that best fits your business goals, your reputation and your budget. And we will help you figure out exactly what that product is! Is In Touch Today offering anything special for The Niche Report readers today? We sure are! We would like to offer The Niche Report readers 50% off select Greeting Cards! Stock up on Thank You cards, Happy Birthday cards, Holiday and Thank You for the Referral cards. Contact us today to redeem your deal, and get the details. Just mention this article when you call us. Where can readers get more information about your company? Call us at 1-800-433-3755 - we would love to hear from you! We pride ourselves on making sure you talk to a real person when you call us during regular business hours. Visit our website at www.intouchtoday.com to browse our product selection, read special reports all about marketing, and learn about our many different products and packages. And feel free to email us at info@intouchtoday.com anytime!

WHAT IS YOUR MORTGAGE IQ?

What's your mortgage IQ? BY karen deis

FHA has a little-known area on their website exclusively for appraisers, which we monitor on a monthly basis. HUD recently updated a FAQ called “Valuation Protocol,” which not only gives appraisers some guidelines on what to do in certain circumstances, but can also be used by loan officers and underwriters if there are questions. Check out the list of “mandatory inspections” FHA requires and share them with your staff and your real estate agents. FHA Endorsement Date: How do we find out the date of the FHA Endorsement for a loan done in 2009? Answer: Find the date an FHA loan has been endorsed on the Case Query Screen in FHA Connection. FHA/VA Debt Prepay to Qualify: Does FHA or VA have restrictions and guidelines on paying debts down or off to qualify for financing? Answer: Neither FHA nor VA offers guidelines on "paying down" debts to qualify EXCEPT for the new FHA ML 2012-3 Collection Accounts, where FHA announces that you cannot "pay down" collection accounts to get them

below the $1,000 threshold that requires them now to be paid off. Read FHA ML 2012-03 Miscellaneous Updates. FHA Required Inspections: What mandatory inspections does FHA require? Answer: Here’s a list of Common Inspection Reports required by FHA! FHA does have a few MANDATORY inspection reports. However, if during the appraisal inspection, the appraiser determines that there might be safety or health issues, they are obligated to require an inspection. If they feel that a structural issue may affect the value of the property (i.e., roof ) they may also require inspections. FHA appraisers ARE required to note any inspections for new or existing homes that are REQUIRED by state or local government and comment on the appraisal report. Here are some of the more common reasons an FHA appraiser would require an inspection report, inspections or certifications. Termite Inspection: Only if evidence of current infestation required by lender or customary for the area. One is not required if there is evidence of previous infestation or repairs have been made due to woodTheNicheReport.com

WHAT IS YOUR MORTGAGE IQ? destroying insects. Well & Septic: If the appraiser notes that the distance between the water supply and the septic system could be a potential for contamination, he may ask for an inspection. It’s up to the lender to determine if the well and septic meet local and state requirements and may ask for local health department certification or inspection. Water Test: Only if the local health authority or lender requires a water test when a new home is built or an existing home is sold, will FHA require that it meet EPA’s minimum standards. Handrails & Trip Hazards: Not automatic. Appraiser needs to comment if they feel that there is a safety risk. However the lender makes the final determination if handrails or sidewalk repairs are needed. Underground Tanks: Only required if the appraiser sees any surface evidence of leakage or on-site contamination. Manufactured Homes: An engineer’s certification that the foundation complies with HUD criteria is required for all manufactured homes. Lead-Based Paint Repairs: If the home was built prior to 1978 and the appraiser notes peeling or chipping paint, correction of defective paint surfaces is required. If repairs are done by a landlord, property owner or contractor, they must be “certified” and have taken training classes in order to repair lead-based paint surfaces. Inspections: The final repairs required by the appraiser must be inspected by the appraiser. The final inspection of any repairs required by an inspection report may be completed by anyone the lender selects. For new construction, the final inspection must be done by the appraiser and the appraiser must state that the new home complies with local building codes. Compliance Government Monitoring: If I take an application over the phone and the borrower does not want to give race and sex, am I supposed to guess anyway? Answer: All applications, whether in-person, by phone, by mail/fax, or by internet, require you to ask the borrower about Government Monitoring information. If they decline to provide the information, you are to make your best guess based upon visual observation or surname. However, if the application was provided by mail/fax, telephone, or internet, the data need not be provided. Resources: ML 90-25: Home Mortgage Disclosure Reporting Requirements, Appendix D: Federal Register, 54 FR 51356 (12/15/1989) and Federal Register 12 CFR 46

May 2012

203 – Home Mortgage Disclosure – Regulation C Fannie/Freddie Non-owner Occupied: I have a borrower who is purchasing/building a non-owner-occupied 4-plex and each unit has a lease agreement. Will Fannie or Freddie allow the rental income to be used to qualify? Answer: Fannie – Yes. A borrower can use rental income to qualify, with copies of lease agreements and the market rent established by the appraiser – 75% of the lesser of the two (or the vacancy percentage listed by the appraiser). There will be additional reserve and other requirements per DU. Freddie – same as above, PLUS Freddie says the borrower must demonstrate a two-year history of managing 1-4-unit Investment Properties if rental income is to be used, have six months PITI reserves, two months PITI reserves for all other homes, and six months rent loss insurance. Negative cash flow must be entered as a liability. Freddie Six-Month Seasoning Rule: What are Freddie’s rules regarding the six-month seasoning requirement if a person originally paid cash for a home? Answer: Freddie has guidelines similar to Fannie. When a person initially paid cash for a home and now wants to refinance to get some of their cash back, certain rules apply. • Need HUD-1 to show no financing was used to obtain the property • Title Commitment must show borrower is owner of subject and no liens exist • Source of funds to purchase subject must be fully documented • Borrowed funds used to purchase must be repaid and reflected on the HUD-1 for the refinance • Mortgage cannot exceed the sum of purchase price and related costs/prepaids documented on HUD-1 from purchase • Purchase required to be an arm’s length transaction • Cash-out refi must comply with all other Freddie requirements Written and contributed by Karen Deis of Mortgagecurrentcy. com. Provided monthly by www.mortgagecurrentcy.com interpreting the Rules and Regulation Changes for loan officers, processors, underwriters, and owners/managers. Mortgage Talking Points,TM charts and checklists included.

Tip of the Month

Tip of the month Lessons Learned, Part II: The Core by stewart mednick

s I stated in the first part of this series, I have been an advocate of ‘learning experiences’ for most of my life. I do not believe in failure; I believe in a learning experience. For those of you who have read my column, I often speak of experiential learning, or a lesson learned. Now, I want to develop this idea into an actual process that can be implemented and used daily, and it takes minutes to accomplish. The benefit is a method to document, improve and refine an activity until it meets your standards of success. Last month, I described the basic process. This month, I will delve into the specific constituent parts starting with “The Core.” The Core consists of the Participant, the Action and the Result. These are the necessary three parts of any process to be able to measure and determine if the

process that is being analyzed is successful. Participant – A participant is the person or group of people that will perform the action. Many times a leader or manager will direct an action to be performed, but the actual performer of the action is dubbed as the participant. Action – The action is fairly self-explanatory. This is the partner to the noun-verb combination. The action is the physical activity performed to achieve the expected result. This action is performed by the participant. The action can be a single task in one sitting, a single task of multiple actions in multiple sittings, or multiple tasks designed to achieve a common or single goal or result. Result – This is the expected outcome resulting from the action performed by the participant. If the expected result is not achieved, then a lesson-learned is created and the cycle continues. The expected result NOT TheNicheReport.com

Tip of the Month proper grammar. I bring this up, because each diagramed sentence had the same basic parts as my Lessons-Learned Cycle. Each sentence had to have a subject-predicate combination, and a direct object of the verb. This is the same with the Core constituents; a participant is the subject (noun), the action is the predicate (verb), and the expected result would be equivalent to the direct object (predicative verb + direct object) in my example. Each time a Lesson-Learned is analyzed, these three main Core components need to be present or your goal will not be successful nor will a proper analysis be able to be performed using this method.

being achieved by the participant’s action is then called an “Actual Result.” I will expand on this in the next installment next month. When I was in grade school, I used to diagram sentences in English. I believe this is a dying or dead process that was once a very analytical method to teach

Stewart Mednick is a seasoned mortgage banker and published author. His writing focuses on relationship development, personal empowerment, customer satisfaction, marketing and sales techniques. Stewart is available for consulting, personal coaching and training sessions. If you have a comment or a question for Stewart, contact him at 651-895-5122 or smednick1@netzero.net

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Prime & FHA Icon Residential www.iconwholesale.com

National Wholesale Lender offering a full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus.

Pacific Union Financial Correspondent

Fannie & Ginnie direct conduit offering Niche Correspondent.

correspondent@loanpacific.com

United Wholesale Mortgage 800-981-8898

Discover Lending Made Easy! UWM offers Conventional, FHA, USDA, VA, Jumbo, Warehouse Lines, and HARP 2.0 with Unlimited LTV/CLTV! UWM provides direct communication with Underwriters & industry-leading technology.

Commercial Windvest Corporation 877-285-0777

REverse Mortgages ReverseIT 888-777-3311

Reverse Mortgages, fastest turn times in the industry. Training and lead support available.

Financing may not be available in all states. The above summaries are intended for Mortgage Professionals only, and not intended for distribution to consumers, as defined by Section 226.2 of Regulation Z, which implements the Truth-In-Lending Act. Information is subject to change without notice. Refer to each lenderâ&#x20AC;&#x2122;s information on products, program, procedures, representations, and warranties for details.

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CLASSIFIEDS

HARD MONEY/Construction/Rehab NEW

Athas Capital Group, Inc. 877-877-1477 x 777

A True Wholesale Direct Hard Money Lender. Residential and Commercial lending, no lender point options and no upfront lender fees. Clear matrices and guidelines. All decisions, funds and processes in house. Hiring Wholesale AE's nationwide. www.athascapital.com Specializing in nationwide fast, creative short-term bridge loans ranging in size from $1 million to more then $50 million. Loan commitments in 24 hours. Fast closings. Loans are available for note purchases, acquisitions, land development, construction, workouts, refinancing, bankruptcies and foreclosures.

Kennedy Funding 800-342-8500

Windvest Corporation 877-285-0777

Specializing in fix and flips, rehabs, income producing and rental investment properties throughout Southern CA. We lend on SFR residential and COMM property. Simple application process with generous broker commissions. Professional service with funding in 7 days. Call us today for a free quote or visit us online www.windvestcorp.com Investment Rehab Lender. We are a direct lender for Fix and Flip loans in CA, AZ and NV. Funding in as little as 7 days. Easy online submission @ www. zincfinancial.net

ZINC Financial 559-326-2509

JUMBO BofI Federal Bank 888-883-9672

Jumbo and Super Jumbo Loans 5/1 - 7/1 and 10/1 options.

MULTIFAMILY NEW Apartment Bank 877-442-4003

Apartment Bank, a division of BofI Federal Bank (NASDAQ:BOFI), is a Nationwide Direct Portfolio Lender that has solidified its standing as a premier multifamily lender in the small balance lending space. Apartment Bankâ&#x20AC;&#x2122;s flexible approach is key to freeing borrowers and brokers from the typical headaches and hassles of small loan transactions. Loan amounts from $250,000 to $10,000,000. Visit http://www.apartmentbank.com

May 2012

classifieds

Service Provider Classifieds Branch Opportunities Freedom Mortgage Corp 800-220-9498

NEW

888-606-8066

Our producers stay with us because they are supported and we don’t mess with their money. HomeTown Lenders is a debt-free, Full Eagle lender who believes in treating all employees and customers fairly. We take pride in being the best in the business.

Mountain West Financial

Consistent. Reliable. Competitive. With over 20 years of experience in Retail Branching, Mountain West Financial opens doors to limitless opportunities.

Hometown Lenders

888-845-4530

NEW

Freedom Mortgage Corporation is a full service mortgage banker engaged in the origination of residential mortgage loans. Freedom’s strategy is simple; to be the best service and quality-oriented lender in the continental United States.

Residential Finance Corporation 800-785-6277

At RFC we believe the status quo simply isn’t good enough. We’re doing retail branching a little bit differently. We start out with an award winning culture and take care of our customers, both internal and external, like family. With that basic premise met, everything else falls right into place. Partner with us!

Training & education MortgageCurrentcy.com 800-231-4787

Interpreting the complicated mortgage rules in plain language (Fannie, Freddie, FHA, VA, Compliance, Credit) that ONLY affect the loan origination side of the business. Help Desk. Rule Change Calendar. Automatic Face Book posts & Mortgage Talking Points™ for your real estate agents. Online e-zine published 2X month. Try for $1.

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Technology

The Mortgage Office 800-833-3343

The Mortgage Office™ is a powerful suite of lending solutions for private lenders. With our comprehensive core loan servicing products and robust add-on products, you can custom build the most powerful and personalized mortgage software solution for your business. From Origination, through Loan Servicing, Mortgage Pools, Investor Access, ACH, email statements, and more. Your back office needs to be automated, and The Mortgage Office™ can help your business grow and expand without increasing your staff.

Byte Software 800-695-1008

Byte Software offers a complete mortgage solution from lead generation to selling loans on the secondary market enabling lenders to close more loans in less time with a SQL database, customization, enterprise scalability, compliance and security.

Calyx 800-362-2599

Affordable software that streamlines and optimizes all phases of the loan process – from loan marketing through closing.

DocMagic 800-649-1362

The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges.

title work & insurance

Entitle Direct 877-936-8485 or 877-9ENTITLE Scott Bond Services 800-365-0101

Hundreds of mortgage professionals have saved their borrowers up to 35% or more on their title insurance by recommending Entitle Direct.

A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide including investor required Special Mortgage Bankers Bonds. Offering a combination of expertise, service, value, and underwriting flexibility that’s second to none.

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May 2012

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marketing & lead Gen Best Rate Referrals 800-811-1402

In Touch Today

Since 2000, In Touch Today has served clients with a variety of marketing products â&#x20AC;&#x201C; both digital and print. Their low minimums, industry specific marketing products, competitive pricing, and custom craftsmanship are accessible for B2B or B2C clients.

800-433-3755

Mailer Leads 866-783-4053 ext 14

NEW

Your mortgage marketing leader with many services available from Direct Mail & List Services, Telemarketing, Internet Leads, Mobile Marketing, and more.

Right Side Marketing 800-456-4395

Titan List & Mailing Services, Inc 800-544-8060

Leader in FICO based lead generation, will help you increase your lead volume 150%. We've taken our highly responsive Mailer Programs and incorporated Personal Websites (PURLs) and QR Codes.

Providing exceptional marketing materials for Real Estate and Mortgage professionals since 1985

Over 12 years of experience catering exclusively for the mortgage industry delivers consistent results from our turn-key campaigns. Our Pre-screened data, 24 hour turn around and custom pieces design continue to lead the industry for mortgage marketing efforts.

Appraisal & AMC StreetLinks Lender Solutions 800-778-4920

Providing lenders with a comprehensive suite of valuation solutions, including full AMC services, self-managed appraisal software, appraisal review tools and robust servicing products.

ADVERTISE YOUR NICHES HERE WITHIN

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Advertiser DIRECTORY

Apartment Bank Apartment Bank, a division of BofI Federal Bank (NASDAQ:BOFI), is a Nationwide Direct Portfolio Lender that has solidified its standing as a premier multifamily lender in the small balance lending space. www.apartmentbank.com 877-442-4003 apartmentcustomerservice@ apartmentbank.com

BofI Federal Bank www.bofifederalbank.com 888-883-9672 LendingPartners@bofifederalbank.com

Calyx Software Affordable software that streamlines and optimizes all phases of the loan processâ&#x20AC;&#x201D;from loan marketing through closing. www.calyxsoftware.com 800-362-2599 sales@calyxsoftware.com

Best Rate Referrals Mortgage Marketing Applied Business Software, Inc Loan Origination, Loan Servicing, and Mortgage Pool Software for Private Lenders. Powerful, flexible, compliant, and easy to use. www.TheMortgageOffice.com 800-833-3343 sales@absnetwork.com

Athas Capital Group, Inc. Direct Wholesale Hard Money Lender specializing in residential and commercial lending. www.athascapital.com Kevin O'Shaughnessy 877-877-1477 ext 777 Kevin@athascapital.com 54

May 2012

Professionals. www.bestratereferrals.com Raymond Bartreau 800-811-1402 raymond@bestratereferrals.com

Byte Software End-to-end Mortgage Loan Origination Software. www.bytesoftware.com 800-695-1008 sales@bytesoftware.com

DocMagic The largest dedicated loan document production company in the country, delivers a fusion of solutions guaranteed to meet today's complex loan document challenges. www.docmagic.com 800-649-1362

Entitle Direct Savings up to 35% or more on title insurance in 30 states. www.EntitleDirect.com/ mortgage 877-936-8485 or 877-9ENTITLE SpecialistCenter@EntitleDirect.com

Advertiser DIRECTORY

Freedom Mortgage Corporation Mortgage Lender. www.fmbranch.com Lynn Tucker, Vice President 800-220-9498 info@fmbranch.com

Hometown Lenders Our producers stay because they are supported & appreciated! www.hometownbranch.com Scott Smith 888-606-8066 scott@htlenders.com

Icon Residential National Wholesale Lender offeringa full line of Conforming and FHA products. We offer personalized customer service where our client is our primary focus. www.iconwholesale.com

In Touch Today Low minimums, industry specific marketing products (such as digital newsletters, e-mail blasts, postcards, and print newsletters), competitive pricing, and custom craftsmanship are accessible for B2B or B2C clients. www.intouchtoday.com Carol Knaack 800-433-3755 cknaack@intouchtoday.com

MortgageCurrentcy.com Interpreting the complicated mortgage rules in plain language. 800-231-4787

The Mortgage Lender Implode-O-Meter Tracking the Housing Finance Breakdown ... the WHOLE truth. www.ml-implode.com

Kennedy Funding Nationwide. Fast creative short-term bridge loans. $1 million-$50 million +. Commitments in 24 hrs. www.kennedyfunding.com Edwin Urrego 800-342-8500 edwin@kennedyfunding.com

Mountain West Financial Making Homeownership a Reality, Since 1990. www.mwfinc.com 888-845-4530 Branching@mwfinc.com

Mailer Leads Lenders and Brokers who use our mailers are not only surviving -- they are thriving. www.MailerLeads.com 866-783-4053 ext 14

RateLink Providing mortgage professionals with timely and accurate data as a means to a competitive advantage. www.ratelink.com 800-938-5193 TheNicheReport.com

Advertiser DIRECTORY

Residential Finance Corporation Producing at least $3mm a month? Partner with Us! Expanding Now with Successful Branch Managers. www.myprobranch.com Rick Pallo 800-785-6277 Rick.pallo@myrfc.com

reverseit! www.urbanfinancialgroup.com 888-777-3311

Right Side Marketing Marketing Materials for Mortgage Professionals. www.rightsidemarketing.com Jill Fleischman 800-456-4395 x10 jill@rightsidemarketing.com 56

May 2012

Scott Bond Services A leader in providing surety license bonds, fidelity, and E&O to the mortgage industry nationwide. scottbondservices.com 800-365-0101 Cary McFadden cmcfadden.scottins.com

StreetLinks Lender Solutions StreetLinks offers leading valuation and servicing solutions driven by quality and service. www.streetlinks.com 800-778-4920 sales@streetlinks.com

Titan List & Mailing Services, Inc. Data provider, printing service & direct mail house. www.titanlists.com 800-544-8060 titanlms@bellsouth.net

United Wholesale Mortgage Discover Lending Made Easy! UWM is a Technology Leader with UW to DU Findings, Superior Customer Service and an Expert Sales Force. Visit www. UWM.com to view our exclusive Products. Allen Beydoun 800-981-8898 abeydoun@uwm.com

Windvest Corporation Hard money lender, specializing in Rehab Loans. NMLS # 394407. www.windvestcorp.com Andre Jimenez John Ermin 877-285-0777 andre@windvestcorp.com/ john@windvestcorp.com

Zinc Financial, Inc. Investment Rehab Lender. www.zincfinancial.net Todd Pigott 559-326-2509 tpigott@zincfinancial.net

BRINGING UP THE REAR - continued from page 58

Or, wait a minute… hang on… how about we call it: “Getting Stumpfed.” (Come on, admit it… I’m good.) Judge Magner went on to describe Wells Fargo's litigation tactics as involving the filing of dozens of briefs, motions and other filings clearly designed to slow down legal proceedings to such a point that anyone thinking of mounting a legal challenge against a bank quickly finds it essentially impossible. And since it’s only through costly litigation that the insidious crimes of Wells Fargo become apparent, all the bank has to do is prevent those with limited resources from doing what they can’t do with limited resources. Now there’s a winning business model for you. Like making billions by stopping blind people from seeing. What sort of a company engineers this sort of strategic core competency anyway? Remember Ford’s infamous Pinto strategy… rather than fix the problem, just settle them as they exploded? Well, this Wells Fargo stuff makes that look as benevolent as Girl Scouts selling cookies after church. Wells Fargo actually engineered a strategy and built a system to rampantly abuse the individuals in our society least able to defend their interests. This is a bank that deserves to have a statue erected in its likeliness and even its own Lazarusstyled sonnet. I’m just thinking out loud here, but how about… “The Statue of Larceny” And inside the base, engraved on a bronze plaque, could be these words… Give us your jobless, injured, bankrupt filers, whose lawyers won’t work free. The wretched refuse against whom in court we’ll always score. Send them one by one, homes all sold by substitute trustee, We’ll rape them, rob them, force them out Wells Fargo’s golden door. Not bad, right? No? Sheesh… tough crowd. Judge Magner, in an interview with Ben Hallman of Huffington Post, said that she personally analyzed the loan files of twenty borrowers in her court and found supposed “errors” in every single instance. So, at least we know the systems are working properly, and somehow I find that oddly reassuring. I don’t know why but there’s something even more terrifying about the idea that we might be getting ripped off by banks in an entirely random way. Like one day you get hit for a hundred… and the next day not only is your entire IRA gone, but two weeks later you learn that the bank bounced one of your checks to the IRS for the penalty on the early withdrawal. I know, right? Now, that would be rude. I guess I only have a couple of questions I’d like to ask, and the most obvious is: Why would anyone whose read about this decision continue to bank at Wells Fargo?

I mean, if they do this sort of thing systematically… AND THEY UNQUESTIONABLY DO, how do you know where the other spots are that are picking your pocket for twenty here and twenty there. Because you’re not going to tell me you think this case has uncovered the only place at Wells Fargo where this sort of thing goes on, are you? Come on… And, my second question is: What do our elected representatives do these days… I mean specifically? State or federal, I don’t care which… you pick. Because it kind of seems like we’ve quietly been transformed into a lawless society in many ways, don’t you think? Like in this bankruptcy case… the judge has uncovered the systematic stealing from the defenseless, but it’s not like it’s a major news story, or anything. To the contrary, it’s nowhere. Doesn’t anyone but me find that amazing? How do they do that? Where have all the journalists gone? I can tell you that I receive more complaints about Wells Fargo refusing to approve loan modifications than any three other mortgage servicers combined. But then, Wells did modify one of the homeowners I wrote about a few months back. I don’t know why, maybe it was an accident. Here’s one more thing Judge Marner said about Wells Fargo in her written opinion… "These are loans of working-class people who bought homes they could afford and whose loans were not administered correctly from an accounting perspective," Judge Magner said. "I think that these types of problems occur in almost every [defaulted] loan in the country." Good Lord. So, Mr. John Stumpf… Wells Fargo’s CEO… you just go ahead committing those criminal acts with impunity. Don’t change now… go down with your ship. Besides, I’m sure there are deceptions your people haven’t thought of yet. Do you have a program that targets autistic children yet? Or what about something abusive for unmarried pregnant girls that never finished high school? Or, what about the elderly, are you doing enough to take advantage of the elderly? I’m sure you’ll think of something, which is why I’ve told my wife and daughter to stay out of banks for the foreseeable future. We only make deposits at the ATM at night, which may sound crazy, but I’m betting will one day soon prove considerably safer than being inside during the day. Lo siento. Que se mejore pronto. Martin Andelman is a staff writer for The Niche Report. He also writes an almost daily column on ML-Implode called Mandelman Matters. He also publishes a Monthly Museletter and you can follow “Mandelman” on Twitter. Send your responses to Martin@TheNicheReport.com. TheNicheReport.com

BRINGING UP THE REAR

Bringing Up the rear John Stumpf, CEO, Wells Fargo Bank BY MARTIN ANDELMAN

oes anyone know what’s happened at Wells Fargo Bank? If so, please let the rest of us know, because in a line-up of TBTF bank CEOs, to stand out as being particularly awful is no easy task… and yet Wells Fargo’s CEO, John Stumpf has risen to the challenge and then some. At the beginning of April of this year, Judge Elizabeth Magner, a federal bankruptcy judge in the Eastern District of Louisiana, characterized Wells Fargo’s behavior as being "highly reprehensible." Think about that for a moment. That means that the judge decided that to describe Wells Fargo as merely “reprehensible,” wasn’t enough. Wow, that is something. Can you imagine someone saying that about you… a federal judge, no less? I’m thinking that if a federal judge ever has the occasion to describe my behavior as being worse than “reprehensible,” I’m going to jail for a long time. Of course, no danger of anything like that happening here… bankers don’t go to jail in this country, everyone knows that. But, in this instance, after more than five years in litigation with a single homeowner, Judge Magner ordered Wells Fargo to pay the New Orleans man $3.1 million in punitive damages. Now, if that sounds like a paltry sum for the likes of Wells Fargo, that’s only because it is. And that it represents one of the largest fines ever levied related to mortgage servicing misconduct hardly makes it feel any better. It’s kind of like being forced to eat dog turd ice cream, but finding out that it’s okay if you pour motor oil on top. Does that improve your circumstances? I guess so, but…

May 2012

Judge Magner, in her opinion, wrote… "Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments and calculate the amounts owed, but perhaps more disturbing is Wells Fargo's refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods." So, what was Wells Fargo doing exactly? Well, they were systematically over-charging the people least able to do anything about it… those filing bankruptcy. In this case, Wells Fargo improperly charged the borrower $24,000 in fees, but it wasn’t done by hand, it was the bank’s automated systems doing precisely what they were programmed to do. Like, anything but an isolated incident. After the borrower fell into default on his mortgage, Wells Fargo’s automated system began applying his mortgage payments to interest and fees that had accrued instead of to principal, as required by his servicing contract, which in turn led to him being charged with a virtual waterfall of additional fees and interest. And even after the borrower filed bankruptcy, Wells Fargo continued to misapply his payments, according to Judge Magner’s written opinion. And why wouldn’t they? I know, it sounds weird to say it, but I think I would have been disappointed had Wells stopped there. There’s even a terme de l'art for this scenario used by consumer lawyers… they call it a “rolling default.” I suppose the name refers to the idea that once the scheme gets rolling, it’s all downhill from there. I think it should be called a “boiling default,” because once it’s boiling, you’re goose is most assuredly cooked. - continued on page 57

CLIENT FOCUS

INTEGRITY

RESPECT FOR EACH INDIVIDUAL

TEAMWORK

INNOVATION

RESPONSIBLE CITIZENSHIP

At our core, each of us finds what truly matters. At Urban Financial Group, our path to success boils down to six unwavering principles: Client Focus, Integrity, Teamwork, Respect for Each Individual, Innovation and Responsible Citizenship. These values are woven into the DNA of our entire staff and embedded in our culture. These six principles guide our behavior and set the bar higher for each of us every day. So in a world where people and businesses are faced with and tempted by shortcuts, we at Urban resolve to take the right path – every time. It’s this determination to do the right thing that has made us a leader in Reverse Mortgage lending. When you let your values guide you, the right path becomes clear. Goals are reached. Business grows. Find out how we can partner with you. Email us today.

info@reverseit.com

* According to RMI measuring number of endorsed wholesale units January – December 2011

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"TheNicheReport is a national trade publication dedicated to wholesale, retail and correspondent lending."

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