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Your source for the latest on originations, settlement, and servicing

STATEWIDE OFFICERS & DIRECTORSPhone # E-mail

Kimberly Ward President (281) 440-4660 [email protected] Smith President-Elect (817) 299-0024 [email protected] Lamorey Secretary (361) 853-9987 [email protected] Baker, CMC Treasurer (281) 313-6683 [email protected] Stulting Immediate Past President (713) 450-9300 [email protected]

Everett Anschutz Director (800) 427-2888 [email protected] Brown Director (214) 641-1778 [email protected] Eastwold Director (713) 829-2777 [email protected] English Director (817) 460-8765 [email protected] Ezell Director (956) 682-2800 [email protected] Lindner Director (713) 869-5550 [email protected]

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CENTRAL TEXAS LEADERSHIPMichael Everist President (512) 346-7996 [email protected] Charlie Keiser President-Elect (830) 693-3579 [email protected] Shaw Secretary (512) 266-3800 [email protected] Marilyn Butler Treasurer (512) 474-2564 [email protected]

Beverly Paterson Director (512) 974-4168 [email protected] Michelle Goldberg Director (512) 289-4328 [email protected] Doug Fugate Director (512) 795-1800 [email protected] Heath Hanson Director (512) 868-9933 [email protected] Tamara Tapman Director (512) 699-6192 [email protected]

DALLAS CHAPTER LEADERSHIPMarc Starr President (972) 918-0404 [email protected] Rogers Secretary (972) 772-8183 [email protected] Dobbs Treasurer (972) 671-5626 [email protected]

Carl Cody Director (972) 922-2108 [email protected] Coke Director (214) 986-1582 [email protected] Pfeiffer Director (972) 365-7531 [email protected] Thompson Director (972) 897-9002 [email protected]

GREATER HOUSTON CHAPTER LEADERSHIPDoug Hodges President (713) 954-0600 [email protected] Kampf President-Elect (713) 528-7100 [email protected] Binkley Secretary (832) 385-0450 [email protected] Jara Treasurer (713) 275-2785 [email protected] Gilbert Past President (281) 462-2088 [email protected] Cornell Chapter Coordinator (281) 923-0546 [email protected]

Joy Burns Director (713) 816-7915 [email protected] Neider Director (713) 355-4288 [email protected] Ann Regan Director (713) 823-0336 [email protected]

SAN ANTONIO CHAPTER LEADERSHIPJohn Hudson President (817) 247-4766 [email protected] Kilgore Secretary (210) 482-9745 [email protected] Neis Treasurer (210) 493-1243 [email protected] Hines President-Elect (210) 293-1243 [email protected]

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Texas Association of Mortgage Professionals14901 Quorum Drive, Suite 435 � Dallas, TX 75254

Phone: (800) 850-8262 � Fax: (530) 484-2906TAMB Web site: www.ttamp.org

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Thursday, September 94:00 p.m.-6:00 p.m. ........................Convention Registration6:00 p.m.-7:30 p.m.................................Welcome Reception

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SAVE THE DATE!Join the

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National Mortgage Professional

Exhibitors and Sponsors

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MAIN STREET

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Compliant Business Systems: Part III of III By Don DeRespinis

Trend Spotter: The Top Four Ways to get Fence-Sittersto … Jump! By Gibran Nicholas

Regulatory Compliance Outlook: August 2010—AvoidingFHA’s Mortgagee Review Board By Jonathan Foxx

Ask Tommy: Your QC Expert By Tommy A. Duncan, CMT

The NAMB Perspective

Value Nation: Avoiding Deals With Property Value IssuesBy Charlie W. Elliott Jr., MAI, SRA

SAFE Smart … The SAFE Call Report: Feels Like aPunishment By Paul Donohue, CRMS

The Secondary Market Overview: From Bonds toProduction … More on Predictions By Dave Hershman

The Trusted Mortgage Professional: Tough Times GettingTougher? By Greg Schroeder

NMP Mortgage Professional of the Month: Joe Amoroso,Director of National Sales, REMN-Real Estate MortgageNetwork Inc.

Forward on Reverse: Reverse Mortgages as NationalSecurity Assets By Atare E. Agbamu, CRMS

Landmark Financial Legislation: New Rules for MortgageOriginators (Part I: Reformation and Regulations) By Jonathan Foxx

Keep Those Cards and Letters Coming By Bill James, CMC

A View From the C-Suite: Unraveling the Complexities ofCompliance in the Age of Technology By David Lykken

The HUD Hammer Hits Hard: FHA Withdraws ApprovalStatus From 905 Lenders By Jeff Mifsud

Taming Mortgage Compliance: Technology is the SecretWeapon By Lionel Urban

Getting Your Technology Ready for Multi-State RegulatoryExams By Jason Roth

GBLA Compliance: Save Thousands on Overhead andMake More Money at the Same Time By Andrew May

RESPA Technology Compliance: Could an Outside Sourcebe the Answer? By David Leoncavallo

Have you reserved your user name on NationalMortgageProfessional.com?

Visit NationalMortgageProfessional.com.

A Message From NMP Media Corp.Executive Vice President Andrew T. Berman

Landmark legislation to rock the industry?When President Barack Obama signed the Dodd-Frank Wall Act into law in July, theintent of the legislation, which weighs in at a whopping 2,319 pages, was to preventfuture collapses of our financial system from happening ever again. This month,Jonathan Foxx will dissect this historic bill in the first part of his series, “LandmarkFinancial Legislation: New Rules for Mortgage Originators.” Jonathan’s in-depth analy-sis takes the content of this 2,319-page bill and breaks down the highlights as it pertainsto you, the mortgage professional. This is a must read for sure!

Compliance is a way of businessAs the mortgage professional of today makes their way through the never-ending maze of regulatory andcompliance changes, this month, we take a close look at this topic and tackle it from a number of angles.For starters, we wrap up the three-part series by Don DeRespinis on compliant business systems and whatit takes to bring your business to a whole new level of quality. David Lykken looks at technology’s role incompliance, while Jeff Mifsud, our resident FHA expert, breaks down recent FHA violations for non-com-pliance. We continue with another take on technology and compliance, this time from Lionel Urban ofPCLender.com as he details ways to manage your compliance systems. Jason Roth of ComplianceEase dis-cusses the role of education and testing and how to keep your staff in compliance under the SAFE Act rulesand the Nationwide Mortgage Licensing System (NMLS). Andrew May of American Dream Residential dis-cusses compliance with the Gramm-Leach-Bliley Act how exposing your client’s personal information cancost you, and we wrap things up with David Leoncavallo from Spora Capital as he explains how hiring anoutside compliance specialist can save you money and headaches.

Our Professional of the MonthThis month, we spotlight Joe Amoroso, director of national sales for REMN-Real Estate MortgageNetwork Inc. Joe’s 20-plus year career in the industry (mostly on the wholesale side) has taken himfrom small shops to big shops. In his profile, he details the major differences between the two anddiscusses the importance of his “open door policy” at REMN and sticking to a unique selling proposi-tion that promises same day turn times. Joe details how the lines between loan officers and uppermanagement have been blurred at REMN, as the lines of communication throughout the company arewide open, from the top to the bottom.

Mortgage Revolution set to invade New YorkIf you’ve read my columns in the past, you know how strong a supporter of the efforts of MortgageRevolution movement I am. I truly believe in the proven concept of creating the perfect forum of a free-flow exchange ideas with your peers on how to improve business and expand the lifeline of the mortgageindustry, not bury the competition in the process. That being said, Mortgage Revolution will bring theirevent to New York’s Westchester Marriott in Tarrytown, N.Y., Friday-Sunday, Oct. 15-17. They set this onefor the weekend, as to not interfere with the busy work week. For more information on MRev North East,visit www.mortgagerevolution.info. If you are interested in sponsorship opportunities, please contact medirectly at 516-409-5555, ext. 333.

Sincerely,

Andrew T. Berman, Executive Vice PresidentNMP Media Corp.

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August 2010Volume 2 • Number 8

1220 Wantagh Avenue • Wantagh, NY 11793-2202Phone: (516) 409-5555 / (888) 409-9770

Fax: (516) 409-4600Web site: www.nationalmortgageprofessional.com

Mortgage PROFESSIONALN A T I O N A L

M A G A Z I N E

Your source for the latest on originations, settlement, and servicing

STAFFEric C. Peck

Editor-in-Chief(516) 409-5555, ext. 312

[email protected]

Andrew T. BermanExecutive Vice President(516) 409-5555, ext. 333

[email protected]

Domenica TrafficandaArt Director

[email protected]

Karen KrizmanSenior National Account Executive

(516) 409-5555, ext. [email protected]

Jon BlakeAdvertising Coordinator(516) 409-5555, ext. 301

[email protected]

Jennifer MoellerBilling Coordinator

(516) 409-5555, ext. [email protected]

ADVERTISINGTo receive any information regarding advertising rates, deadlines and require-ments, please contact Senior National Account Executive Karen Krizman at(516) 409-5555, ext. 326 or e-mail [email protected].

ARTICLE SUBMISSIONS/PRESS RELEASESTo submit any material, including articles and press releases, pleasecontact Editor-in-Chief Eric C. Peck at (516) 409-5555, ext. 312 or [email protected]. The deadline for submissions is the first ofthe month prior to the target issue.

SUBSCRIPTIONSTo receive subscription information, please call (516) 409-5555, ext.301; e-mail [email protected] or visit www.nationalmort-gageprofessional.com. Any subscription changes may be made to theattention of “Circulation” via fax to (516) 409-4600.

Statements, articles and opinions in National Mortgage Professional Magazineare the responsibility of the authors alone and do not imply the opinion orendorsement of NMP Media Corp., or the officers or members of NationalAssociation of Mortgage Brokers and its State Affiliates (NAMB), NationalAssociation of Professional Mortgage Women (NAPMW), National CreditReporting Association (NCRA) and/or other state mortgage trade associations.

Participation in NAMB, NAPMW, NCRA, and/or other state mortgagetrade associations events, activities and/or publications is available ona non-discriminatory basis and does not reflect the endorsement of theproduct and/or services by NMP Media Corp., NAMB, NAPMW, NCRA,and other state mortgage trade associations.

National Mortgage Professional Magazine, NAMB, NAPMW, NCRA,and/or other state mortgage trade associations do not make any misrepre-sentations or warranties concerning the regulatory and/or complianceaspects of advertisers, products or services and/or the editorial content con-tained in NMP Media Corp. publications. National Mortgage ProfessionalMagazine and NMP Media Corp. reserve the right to edit, reject and/or post-pone the publication of any articles, information or data.

National Mortgage Professional Magazineis published monthly by NMP Media Corp.

Copyright © 2010 NMP Media Corp.

NATI

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MORTGAGE PROFESSIONAL

MAGAZINE

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National Credit Reporting Association Inc.125 East Lake Street, Suite 200 � Bloomingdale, IL 60108

Phone #: (630) 539-1525 � Fax #: (630) 539-1526Web site: www.ncrainc.org

The National Association of Mortgage Brokers

11325 Random Hills Road, Suite 360Fairfax, VA 22030

Phone #: (703) 342-5900 � Fax #: (703) 342-5905

President—William R. Howe, CMC, CRMSHowe Mortgage Corporation13322 East Paradise Drive � Scottsdale, AZ 85259(602) 200-8100 � [email protected]

President-Elect—Michael D’Alonzo, CMCCreative Mortgage Group1126 Horsham Road, Suite D � Maple Glen, PA 19002(215) 657-9600 � [email protected]

Vice President—Donald J. Frommeyer, CRMSAmtrust Mortgage Funding Inc.200 Medical Drive, Suite D � Carmel, IN 46032(317) 575-4355 � [email protected]

Secretary—Virginia Ferguson, CMCHeritage Valley Mortgage Inc.5700 Stoneridge Mall Road, Suite 225 � Pleasanton, CA 94588(925) 469-0100 � [email protected]

Treasurer—John Councilman, CMC,CRMSAMC Mortgage Corporation2613 Fallston Road � Fallston, MD 21047(410) 557-6400 � [email protected]

Immediate Past President—Jim Pair, CMCMortgage Associates Corpus Christi6262 Weber Road, Suite 208 � Corpus Christi, TX 78413(361) 853-9987 � [email protected]

Michael Anderson, CRMSEssential Mortgage3029 S. Sherwood Forest Boulevard, Suite 200Baton Rouge, LA 70816(225) 297-7704 � [email protected]

Donald Fader, CRMSSMC Home FinanceP.O. Box 1376 � Kinston, NC 28503-1376(252) 523-5800 � [email protected]

Deb Killian, CRMSCharter Oak Lending Group LLC3 Corporate Drive, P.O. Box 3196 � Danbury, CT 06813-3196(203) 778-9999, ext. 103 � [email protected]

Olga Kucerak, CRMSCrown Lending222 East Houston, Suite 1600 � San Antonio, TX 78205(210) 828-3384 � [email protected]

Walter ScottExcalibur Financial Inc.175 Strafford Avenue, Suite 1 � Wayne, PA 19087(215) 669-3273 � [email protected]

Donald StarksD.C. Starks Mortgage Associates Inc.141 South Main Street � Bourbonnais, IL 60914(815) 935-0710 � [email protected]

Marty FlynnPresident(925) 831-3520, ext. [email protected]

Tom ConwellVice President(248) [email protected]

Daphne LargeTreasurer(901) [email protected]

William BowerDirector(800) [email protected]

Mike BrownDirector(800) [email protected]

Susan CataldoDirector(404) 303-8656, ext. [email protected]

Nancy FedichDirector(908) 813-8555, ext. [email protected]

Sanford (Sandy) LubinDirector(805) [email protected]

Judy RyanDirector(800) 929-3400, ext. [email protected]

Tom SwiderDirector(856) 787-9005, ext. [email protected]

Donald J. UngerDirector(303) 670-7993, ext. [email protected]

NCRA StaffTerry ClemansExecutive Director(630) [email protected]

Jan GerberOffice Manager/Membership Services(630) [email protected]

PresidentGary Tumbiolo, CMI(919) 452-1529 [email protected]

President-ElectLaurie Abshier, GML, CMI(661) 283-1262E-Mail: [email protected]

Senior Vice PresidentCandace Smith, CMI, CME (512) [email protected]

Vice President—Northwestern RegionJill M. Kinsman(206) 344-7827 [email protected]

Vice President—Western RegionTim Courtney(760) [email protected]

Vice President—Central RegionLisa Puckett(405) [email protected]

Vice President—Eastern RegionChristine Pollard(646) [email protected]

SecretaryMurielle Barnes, CME(806) 373-6641 [email protected]

TreasurerHulene Bridgman-Works(972) 494-2788 [email protected]

Parliamentarian Dawn Adams, GML, CMI(607) [email protected]

NAMB Board of Directors

National Association of ProfessionalMortgage Women

P.O. Box 451718 � Garland, TX 75042Phone #: (800) 827-3034 � Fax #: (469) 524-5121

Web site: www.napmw.org

Officers

Directors 2010 Board of Directors

National Board of Directors

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New mortgage industrytrade association forcompliance professionalsforms committees

Jonathan Foxx, presi-dent of the AssociationResidential Mortgage

Compliance Professionals (ARMCP), hasannounced the formation of the fol-lowing new ARMCP Committees:Advocacy, Best Practices & Standards,Ethics, Events, Legislation, Industry Liaison,Job Opportunities, Media and Press,Newsletter, Professional Development,Regulatory Updates, Research, SocialMedia, Steering, and Web site and Weblog.Other committees are planned. Virtuallyevery facet of residential mortgage compli-ance will have a committee to support allthe members, with the goal of creating acoherent, professional approach that is

recognized by its members.“We launched our new organization on

June 1, 2010, and the membershipresponse has been very encouraging. Nowwe will begin the process of laying down asecure foundation for our future. With thisin mind, we are forming committees toaddress important aspects of our work inmany areas of residential mortgage com-pliance,” said Foxx. “Each committee willmeet at LinkedIn, as a Subgroup, and worktogether to formulate policy, procedures,and services for our membership. And wewill soon be convening a SteeringCommittee to set forth guidelines for elect-ing officers, finalizing by-laws for members’approval, and helping to arrange informa-tion and documentation for all ARMCPmembers to consider and vote on.”

ARMCP is now expanding its new Website to include special new features for its

members’ use. Additionally, it is buildingaccess to “cloud” computing, which willallow the group’s participants to worktogether jointly and simultaneously on theorganization’s projects. The updated ver-sion of the Web site should be available byJune 30, 2010.

In a statement to the membership,Foxx said “it is important to take advan-tage of technology to help build theARMCP and especially to explore compli-ance issues, news, guidelines, and bank-ing laws in real-time.”

Eventually, the organization will useLinkedIn as a legacy setting and moveits overall Web space experience to itsown Web site, with built-in interactiveand dynamic features.

ARMCP is the first and only nationalorganization in the United States formedto offer discussion panels, educationalforums, lectures, regulatory FAQs, advo-cacy, and other venues exclusively for res-idential mortgage compliance profes-sionals. Regular Members must be indus-try participants who have an actual prac-tice or institutional responsibilitiesinvolving residential mortgage compli-ance. Membership is free at this time.For more information, visit www.armcp.org.

Final rules issued toimplement SAFE Actrequirements for registra-tion of loan officers

Federal agencies haveissued final rules requir-ing residential mortgageloan originators who are

employees of national and state banks,savings associations, Farm Credit Systeminstitutions, credit unions, and certain oftheir subsidiaries (agency-regulated insti-tutions) to meet the registration require-ments of the Secure and Fair Enforcementfor Mortgage Licensing Act of 2008 (SAFEAct). The final rules are being issued bythe Office of the Comptroller of theCurrency (OCC), Board of Governors of theFederal Reserve System, Federal DepositInsurance Corporation (FDIC), Office ofThrift Supervision (OTS), Farm CreditAdministration, and National CreditUnion Administration (NCUA).

The SAFE Act requires residentialmortgage loan originators who areemployees of agency-regulated institu-tions to be registered with theNationwide Mortgage Licensing Systemand Registry. The NMLS is a databasecreated by the Conference of State BankSupervisors (CSBS) and the AmericanAssociation of Residential MortgageRegulators (AARMR) to support thelicensing of mortgage loan originatorsby the states. As part of this registrationprocess, residential mortgage loan orig-inators must furnish to the registryinformation and fingerprints for back-ground checks. The SAFE Act generallyprohibits employees of agency-regulat-ed institutions from originating residen-tial mortgage loans unless they registerwith the registry.

The agencies’ final rules establishthe registration requirements for res-

continued on page 10

Contact one of our Regional Managers in your areaTX, OK, LA: David Walden 1-214-878-6300 • [email protected]

Southeast & East Coast: Ken Michael 1-931-222-8023 • [email protected]

CA, OR, WA, NV: Allen Friedman 1-415-298-2500 • [email protected]

UT, CO, ID, WY, MT: Tony Moore 1-801-824-7243 • [email protected]

KEY #1Offer your borrowers full product line,BEAT THE STREET PRICING anddedicated service support • FHA, Conventional, Jumbo, Super Jumbo,

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As we discussed in Part II of this article,George Washington’s strategies havemany similarities to the mortgage orig-ination business of today. Originatorsand processors strive to serve cus-tomers with the same products thecompetition (big banks) have. The com-petition uses tactics andattack in line formationwith large numbers ofpeople, advertisements,and capital. They formmarketing alliances withRealtor partners and useexpensive direct mail, tel-evision and the Internet toentice customers, some-times into paying higherfees and interest ratesthan the smaller companywould charge. They haveunlimited resources, butthey also must maintainthe line formation tacticsand cannot deviate.

The Successful MortgageBroker takes a hand-to-hand approach with peo-ple to the community, providing a serviceand access to knowledgeable profes-sionals. Leadership, training, weaponsand intelligence are the most viablesolutions for small businesses today.The training, weapons and intelligenceare all components of a system thatcan be worked on and modified asquickly as the intelligence feeds us newinformation on rates, programs, lawsand regulations. The weapons used inmortgage origination are transparen-cy, education, accountability and acomplete system to document theresults.

This leads us to the Principals ofCompliance, which formulates a work-ing system around the company policiesand procedures model. The principalsgovern appropriate business processes,activities and outcomes to meet legalrequirements.

The Principals of Compliance includeraising awareness; creating policies,procedures and protections; frequenttraining; holding all employees andvendors accountable; monitoring andre-training employees on policybreaches; actively protecting cus-tomers; detecting risks; and responding

to violations and breaches. Let’s look ateach component.

To raise awareness, there must benotice and validation of proper methodsto officially document an activity makingthe First Principal of Compliance that allcommunication must be recorded, time-

stamped and serially loggedto be considered a validtransaction. All replies andcomments that relate to theoriginal communicationmust contain a copy of theoriginal, thus validating it.

For example, an origina-tor requests their processorto run a loan through alender’s automated under-writing system (AUS) andthen notify them of theresults. The processorwould then submit theloan, get the findings,record the findings in therecord and notify the origi-nator of the results byreplying to the request. Ifthe processor were delayed

in performing the request, the reply wouldindicate an acknowledgement of therequest and document when it would becompleted. This process is called notifica-tion and verification. It works with allinteractions between employees and pre-vents misunderstanding and potentialcompliance violations.

In order for this process to occur, thecreation of Policies, Procedures andProtections would be necessary. Thedefinition of a valid transaction is thefact that they are documented andmade readily available to all parties.This makes the Second Principal ofCompliance that all valid business poli-cies and procedures are documented ina single Company Model. The CompanyModel is a combination of the employ-ment contracts, employee manuals,company charter and company operat-ing manuals. All activities, goals,resources, guidelines and policies arederived directly from the CompanyModel.

Execution of an ongoing trainingsystem is necessary for compliance. Asa result of the Secure and Fair

Compliant Business Systems: Part III of III

By Don DeRespinis

“Leadership requiresproactive measures

to move the businessforward and to

remove unnecessaryobstacles.”

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W E A R E R E M N W H O L E S A L E

These days, not many mortgage companies

are talking product. Naturally, REMN has FHA,

VA and Conventional solutions to fit the needs

of your customers. But, at REMN, our most

valuable product is our people. The REMN

Sales and Operations teams give you – and

your loans – the time and attention you

deserve. Even better, at REMN, same-day

approvals are guaranteed.* You can rely on us

to get the little, yet vital, things taken care of

on time. It’s time to get to know our people.

Real Estate Mortgage Network, Inc. is located at 499 Thornall Street, Second Floor, Edison, NJ 08837. NMLS #6521. This information is for use by mortgage professionals only and should not be distributed to or used by consumers or third parties. Information is accurate as of date of printing and is subject to change without notice.

* Same-day decisions guaranteed if file is received by 11 a.m. EST.

Learn more at www.remnwholesale.com

Our product is our people.

Enforcement for Mortgage LicensingAct (SAFE Act), all states now requirecontinuing education (CE) to informoriginators now to operate lawfully.Changes in laws, new regulations oreven new programs must be includedin a system of processes designed toeducate staff and arm them with themost effective weapons. The ThirdPrincipal is that all activities must beincluded in the Company Model andall training must apply to the compo-nents of the Company Model to bevalid.

For instance, the company policymay require a written opinion letterto be sent to every applicant even ifthe company is unable to provide aloan. The policy is designed toimprove the chances that a personwill come back to the company at alater date when they have met therequirements of the opinion letter.Maybe you could not submit a loanfor them because their credit score isbelow 580. The opinion letter wouldinform them what steps they need totake in order to qualify for a loan atthe best rates available by recom-mending how to increase their scores.It’s a good reason to mail them some-thing they will hang onto by takinginformation and providing a compre-hensive narrative about their currentcredit status.

The Fourth Principal is any viola-tion of principals is automaticallyconsidered a personal transaction. Apersonal transaction, along with allits associated communications, is notconsidered valid and is solely execut-ed by the individual on his or herown responsibility. Such transac-tions, when identified, are analyzed,grouped together and isolated fromcompany documentation, allowingthe company to prove the employeeacted without authority and in viola-tion of company policy.

Violations of Compliance Principalsmust be addressed in a process thatmonitors and retrain employees onpolicy breaches using minor viola-tions as an education, while repeat-ed or major violations are eliminat-ed quickly. The Fifth Principal ofCompliance is staff can only bejudged by the results of valid trans-actions. Inappropriate use of compa-ny time or resources for invalid andconsequently inappropriate transac-tions will always be a reason for ter-mination … no exceptions.

Committing violations of the com-pany model is automatically consid-ered as an act against protecting cus-tomers and every effort must be takento consider if there can be an adverseeffect on the customers and vendorswe serve. Principal Six is any valid orinvalid use of staff time or resourcesmust be reviewed and its effects oncustomer considered.

The Company Model and all validtransactions are reviewed and sum-marized to identify potential risks.Principal Seven is inspect what isexpected. A system to review and con-trol communications is critical to sup-porting a claim of full compliance. Ase-mail becomes the primary methodof communication, all e-mails aremaintained in separate accounts.Company managers cannot review thee-mails of every employee in real-time. However, when a company usesan internal messaging system for all

communications, the file can be easilymonitored. Methods that search forkeywords can produce significantinformation about the content of mes-sages and potentially divert a difficultsituation.

In order to respond to violations orbreaches, the violation must bepromptly identified, evaluated and cor-rected in accordance with theCompany Model for violations.Principal Eight is to Protect YourMission by complying with it every day.Leadership requires proactive meas-ures to move the business forward andto remove unnecessary obstacles.

Creating a compliant system requiresdaily policies, procedures and protectionsto become routine. Compliance in itself

compliant business systems continued from page 6

can be overwhelming unless you have asystem that is designed to handle it.

Don DeRespinis is a certified publicaccountant (CPA) and a CertifiedResidential Mortgage Specialist (CRMS). Heand his wife Deb Killian have operatedCharter Oak Lending Group LLC, a mortgagebroker and correspondent lender withlicenses in Connecticut, New York andFlorida for the past 15 years. They have alsodeveloped a comprehensive and integratedbusiness operating system used to operateall aspects of a mortgage originationbranch, including integrated documentmanagement, communication manage-ment, accounting, compliance and controls.For more information, visit www.mortgage-center.net or e-mail [email protected].

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SAVE THE DATE!Mortgage Brokers and Loan Originators

Attend the 2010 NAMB/WEST ConferenceDecember 4-6, 2010 at the MGM Grand Las Vegas.


NAMB/WEST

news flash continued from page 4

idential mortgage loan originatorsemployed by agency-regulated insti-tutions and requirements for theseinstitutions, including the adoptionof policies and procedures to ensurecompliance with the SAFE Act and finalrules. As required by the SAFE Act, thefinal rules also require that each resi-dential mortgage loan originatorobtain a unique identifier through theregistry that will remain with that res-idential mortgage loan originator,regardless of changes in employment.This will enable consumers to easilyaccess employment and other back-ground information about registeredmortgage loan originators from theregistry. Under the final rules, regis-tered mortgage loan originators andagency-regulated institutions mustprovide these unique identifiers toconsumers.

The final rules take effect on Oct. 1,2010. The agencies anticipate that theregistry could begin accepting federalregistrations as early as Jan. 28, 2011.Employees of agency-regulated institu-tions must not register until the agen-cies instruct them to do so. The agen-cies will provide an advance announce-ment of the date when the registry willbegin accepting federal registrations,and agency-regulated institutions andtheir applicable employees will have

180 days from that date to comply withthe initial registration requirements.For more information, visit www.feder-alreserve.gov.

FHA’s Mortgagee ReviewBoard fines hundreds oflenders for violations

The Federal HousingAdministration’s MortgageeReview Board (MRB) haspublished a notice in the

Federal Register to announce dozens ofadministrative actions against FHA-approved lenders who failed to meet itsrequirements. This year alone, the MRBtook nearly 1,500 administrative sanc-tions against lenders, including repri-mands, probations, suspensions, with-drawals of approval, and civil moneypenalties.

“Lenders should know by now thatFHA will not tolerate fraudulent orpredatory lending practices,” said FHACommissioner David H. Stevens. “AnyFHA-approved lender that does busi-ness with us must follow our standards.If we determine that our partners arenot playing by the rules, we will takeaction—it’s that simple.”

FHA’s Mortgagee Review Board sanc-tions FHA-approved lenders for viola-tions of the agency’s program require-ments. For serious violations, the Board

can withdraw a lender’s FHA approvalso that the lender cannot participate inFHA programs. In less serious cases, theBoard enters into settlement agree-ments with lenders to bring them intocompliance. The Board can also imposecivil money penalties, probation, sus-pension, and issue letters of reprimand.For more information, visit www.hud.gov.

Citigroup to pay SEC’s$75 million penalty formisleading investors onsub-prime loans

The Securities and ExchangeCommission (SEC) hascharged Citigroup with

misleading investors about the company’sexposure to sub-prime mortgage-relatedassets. The SEC also charged one currentand one former executive for their roles incausing Citigroup to make the misleadingstatements in an SEC filing.

The SEC alleges that, in response tointense investor interest on the topic,Citigroup repeatedly made misleadingstatements in earnings calls and publicfilings about the extent of its holdingsof assets backed by sub-prime mort-gages. Between July and mid-October2007, Citigroup represented that sub-prime exposure in its investment bank-ing unit was $13 billion or less, when infact it was more than $50 billion.

“Even as late as fall 2007, as themortgage market was rapidly deterio-rating, Citigroup boasted of superiorrisk management skills in reducing itssubprime exposure to approximately

$13 billion. In fact, billions more inCDO and other subprime exposure saton its books undisclosed to investors,”said Robert Khuzami, director of theSEC’s Division of Enforcement. “Therules of financial disclosure are sim-ple—if you choose to speak, speak infull and not in half-truths.”

Citigroup and the two executiveshave agreed to settle the SEC’s charges.Citigroup agreed to pay a $75 millionpenalty. Former chief financial officerGary Crittenden agreed to pay$100,000, and former head of investorrelations Arthur Tildesley Jr., (currentlythe head of cross marketing atCitigroup) agreed to pay $80,000.

According to the SEC’s complaint,filed in U.S. District Court for theDistrict of Columbia, Citigroup repre-sented in earnings calls and public fil-ings from July 20 to Oct. 15, 2007, thatits investment bank’s sub-prime expo-sure was $13 billion or less and haddeclined over the course of 2007.However, the $13 billion figure report-ed by Citigroup omitted two categoriesof sub-prime-backed assets: “supersenior” tranches of collateralized debtobligations (CDOs) and “liquidity puts.”Citigroup had more than $40 billion ofadditional sub-prime exposure in thesecategories, which it didn’t disclose untilNovember 2007 after a decline in theirvalue.

The SEC’s complaint alleges that asearly as April 2007, Citigroup’s senior


At United Northern, we give you the freedom to originate and succeed with our winning team.

About working with United Northern Mortgage Bankers• Ongoing training and consultation with top industry executives

• Access to in-house marketing services

• Pricing support desk to ensure maximum profitability on eachloan, while maintaining a competitive advantage over the street

• Proven leading-edge technology (built on Encompass 360technology)

• Virtual office support

• Licensing and regulatory compliance services

• An in-house team to monitor SAFE Act compliance

• In-house underwriting

• Most loans underwritten in 24 to 48 hours

• Multiple valuation tools to research value

• In-house valuation desk to help ensure accurate values and responsive turnaround time

• Multiple established warehouse lines

Limited room available for established Team Leaders andLicensed Mortgage Originators. Become part of an

established 30-year Mortgage Banker witha proven track record and success.

Learn about the great opportunities available by making an appointment with

United Northern Mortgage Bankers Executive Vice President Julio de Cardenas by calling

888-600-8808, ext. 1 or by e-mailing [email protected].

United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State Banking Dept. - Licensed Mortgage Banker – License #100724 New Jersey Dept. of Banking and Insurance – Mortgage Lender – License #L0046623 Penn-sylvania Dept. of Banking – Mortgage Lender – License #20887 Connecticut Dept. of Banking - Mortgage Lender - License #20372 Massachusetts Div. of Banks and Loan Agencies - Mortgage Lender & Mortgage Broker – License #MC5070North Carolina Commissioner of Banks – Mortgage Lender – License #L140365 South Carolina State Board of Financial Institutions – Supervised Lender – License #S7,461 Florida Dept. of Financial Institutions - Mortgage Lender - License#ML0700679 Senior Security Home Advantage is a lending area of United Northern Mortgage Bankers, Ltd. Direct FHA Endorsed Lender

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It’s no secret that mortgage rates are at record lows.But many so-called “gurus” are discouraging con-sumers from taking action. Just recently, a report waswidely circulated suggesting that a whopping 62 per-cent of homeowners would NOT benefit by refinanc-ing in spite of mortgage rates being at all-time lows.Don’t let all of the guru noise or Internet-babble foolyou or your clients. Your mission, should you chooseto accept it, is to cut through all the noise and moti-vate people to get moving before it’s too late! Hereare four simple ways to do just that.

#1. Illustrate How Small ChangesBake a BIG differenceConsider someone who just purchased a home orrefinanced their $200,000 mortgage several monthsago. They might have a mortgage rate of 5.5 per-cent. Many “experts” would say it’s not worth it torefinance unless they can lower their rate by a fullone percent without paying points. However, what ifthey paid $4,000 in points and closing costs and

bumped up their mortgage balance to $204,000? Here’s what their situationmight look like:

Old payment ..............................$1,135.58New payment ............................$1,033.64Payment savings ..........................$101.94

Wow!!What if this represents an old borrower in your database, or a client of a Realtor

or financial advisor referral partner? If this consumer listens to all the “gurus” tellingthem not to bother refinancing, they would actually lose up to $101,456! You needto communicate this to consumers and referral partners. Tell them to do themselvesa favor and put that $101,456 back in their pocket by calling you today! Remember,people are often more motivated by the fear of loss than the hope of gain. Thismeans it may be better for you to focus on helping the client avoid losing $101,000instead of focusing on helping them save $101 per month. Dynamic resources pro-vided by the CMPS Institute help you paint a crystal clear picture of exactly howmuch money clients and prospects will lose by not doing business with you.

#2. Promote the biggest clearance sale of the centuryEverybody loves a good sale. In fact, clearance sales get people really excited. Here’sthe deal: Houses are on sale right now! In fact, in some neighborhoods, there is ahuge clearance sale going on. Not only that, but the last time houses were on sale

(in the 1980s), mortgages were being marked up. This time around, there is also ahuge clearance sale going on in the mortgage market. Most fence-sitting con-sumers don’t understand the dynamics of the housing and mortgage markets.However, most fence-sitting consumers completely understand the dynamics ofclearance sales. Many of them will get off that fence if you can show them how thegiant clearance sale in the housing and mortgage markets benefits them.

#3. Illustrate how the mortgage market is schizophrenicMortgage rates fluctuate based on the price fluctuations and trading patterns ofmortgage-backed securities (MBS) that trade on the bond market. The traders thatmanage billions of dollars of MBS and pull the trigger on the trades are humanbeings. This means that they are emotional beings just like you and me. Whenthese money managers are fearful, they sell out of their riskier stock marketinvestments and buy safer investments like MBS. This drives mortgage rates down.When these money managers are feeling good about life, they get greedy, sell outof their safer MBS investments and put their money into riskier investments. Thisdrives mortgage rates up. Remember the fear and market panic when LehmanBrothers went bankrupt in September 2008? The fear only lasted a few shortmonths and the traders started getting greedy, driving the stock market up over30 percent in 2009. Now, the traders are fearful again because of the lousy eco-nomic reports and the European debt crisis. Here is a chart illustrating the volatil-ity of the MBS market and the emotional schizophrenia of the bond traders.

Pay special attention to the Greed displayed in the spring of 2009 and howthis quickly drove down bond prices (mortgage rates quickly went up at thattime). Also pay special attention to the Fear being displayed right now and howthis is driving up bond prices (mortgage rates have gone down in response).Always keep in mind that market emotion is very fickle and can change in aninstant. That’s why it’s so important to keep updated with real-time MBS info.You can motivate fence-sitters by showing them a picture of what’s happeningin the market and why they need to get off the fence now, before it’s too late.

#4. Illustrate how financial reform will drive upmortgage ratesThere are two sections of the new financial reform law that will cause mortgagerates to increase in the future. First of all, the new law requires lenders to keep afive percent stake in the mortgages that they originate unless the loans meet acertain criteria. Impacted loans include adjustable-rate mortgages (ARMs), inter-est-only mortgages, alt-A loans, many types of jumbo loans, etc. This means thatlenders won’t be able to offload some of the higher risk associated with theseloans, and interest rates on these types of loans will rise.

Secondly, the new law failed to address the issues Fannie Mae, Freddie Mac, andthe Federal Housing Administration (FHA), and their future remains uncertain. Themarket doesn’t like uncertainty, and rates on all mortgages could rise in the futuredepending on when and how the issue of Fannie and Freddie is resolved. Thinkabout it this way: 95 percent of all loans currently being originated are insured by

BY GIBRAN NICHOLAS

The Top Four Ways to Get Fence-Sitters to … Jump!

“Your mission,should you choose to

accept it, is to cutthrough all the noiseand motivate peopleto get moving before

it’s too late!”

$6,782 in five years $7,047 in five years

$15,271 in 10 years $16,552 in 10 years

$25,897 in 15 years $29,373 in 15 years

$39,210 in 20 years $46,666 in 20 years

$76,698 in 30 years $101,456 in 30 years

If they save the $101 at 4.5 % theywill have

If they save the $101 at 6% theywill have


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Brokers and account executive confused over compliancewith Mortgagee Letter 2010-20The interpretations of Mortgagee Letter 2010-20 continue to manifest itself amongthe mortgage industry. Back in late 2009, the comment period began and a group ofnation’s top post-closing quality control companies came together to address thisissue through the Mortgage Bankers Association (MBA) with Tamara King actingas liaison between the MBA and the Federal Housing Administration (FHA). At thattime, the FHA was not ready to provide clarification to the issue of post-closing qual-ity control, and many of the brokers interpreted the up and coming Mortgagee Let-ter regarding the new policy between brokers, sponsoring mortgagees, and FHA asa “Get Out of Jail Free” card for the brokers to not have to be accountable for post-closing quality control on FHA loans.

Many account executives have e-mailed or told brokers they will no longer have toperform post-closing quality control audits on FHA loans. Many of these broker clientshave relayed this information to me. I have forwarded the e-mails to top executives inthe quality control and fraud departments of banks and to mortgage bankers for clari-fication and they have all, on every occasion, communicated back to me that they havenot released such information or authorized its publication.

Karrie Bennett of U.S. Bank was taken aback by the rumors and had indicated thatthey will still requiring brokers to provide proof of a quality control program. She indi-cated that they were going to provide clarification of U.S. Bank’s intent regarding post-closing FHA quality control to their marketing department so their account executiveswould have no question where the company stands on this issue.

I have had a number of conversations with mortgage brokers, as well as NationalAssociation Mortgage Brokers Immediate Past President Jim Pair. The conclusionreached by all parties is that the mortgage broker and third-party originators willmore likely experience increased supervision in post-closing quality control thanwhat was ever provided by FHA. Mr. Pair agrees and has communicated this publicly.

Ron Miles, president of Transatlantic Mortgage LLC in Reisterstown, Md., con-curs with Pair’s assessment and stated that he was going to continue post-closingquality control on his FHA loan as insurance and peace of mind. Ultimately Miles be-lieves this will help with the prevention of repurchases.

Mortgagee Letter 2010-10 states:

“HUD will hold FHA-approved mortgagees responsible for compliance with FHArequirements in all aspects of an FHA loan transaction, whether performed by the ap-proved mortgagee or by its sponsored third-party originator, unless applicable law orregulation governing the violations in question require specific knowledge on thepart of the party to be held responsible. HUD expects that FHA-approved mortgageeswill pursue sponsoring relationships with responsible originators, and that approvedmortgagees will diligently monitor and evaluate the activities and performance ofthose they sponsor. The Department will continue to carefully review and evaluateFHA-approved mortgagees’ activities and performance, and will take appropriate ac-tion to enforce its requirements when violations occur.”

What this means is the sponsoring mortgagee “will diligently monitor and eval-uate” and will require the “responsible originator” broker to perform post-closingquality control. The sponsoring mortgagee will have brokers provide evidence ofpost-closing audits, as well as other quality control items.

By Tommy A. Duncan, CMT

Sponsored by

Tommy A. Duncan, CMT is executive vice president of Quality Mortgage Serv-ices LLC. For answers to your QC and FHA questions, please contact Tommy at(615) 591-2528 or e-mail [email protected]. You may also visit Qual-ity Mortgage Services LLC on the Web at www.qualitymortgageservices.com.

If there is one particular place every U.S. Department of Housing & Urban Development(HUD)/Federal Housing Administration (FHA)-approved mortgagee wants to avoid it is theMortgagee Review Board (MRB). It was established in 1989 to take disciplinary actionagainst any HUD/FHA-approved mortgagee who knowingly and materially violates FHA’sprogram statutes, regulations and handbook requirements.1 The MRB is empowered toenforce administrative sanctions, including reprimand, probation, and suspension, with-drawal of approval, cease-and-desist orders, and civil money penalties.2

Trust me … you don’t want to go there!If you are an FHA-approved lender within the Title I and Title II programs,3 you will

likely provide your defense before the MRB if your violations involve the most seriousfindings. HUD/FHA staff will refer the lender to the MRB when there is evidence of wide-spread abuse of its program requirements.4 With respect to the single-family lenders,approximately 10 percent of Quality Assurance Division reviews are referred to the MRBfor enforcement, with the remaining 90 percent handled at the Field Office level.

In representing clients before the MRB, I can vouch for the exhaustive due diligencethat is virtually mandated, the considerable costs involved, the experienced legal coun-sel and requisite regulatory compliance expertise that is needed, and the significantadverse impact on an FHA lender’s ability to conduct or even continue in business.

So, what kinds of violations will send your case to the MRB?5

Recently, HUD published its required, Public Notice6 that advises of actionstaken by the MRB from July 10, 2008 to March 18, 2010.7 It’s not a pretty picture,but the improper actions (or failure to implement required actions) on the part ofother lenders may serve to enlighten you about what could await you—literallyand figuratively—if you do not get with the program!

Settlement agreements, civil monetary penalties …Withdrawal of FHA approval …Suspensions, probations and reprimandsLet’s take a look at certain violations and administrative remedies that have takenplace during the above-mentioned time frame. Many of these violations incurredcivil money penalties, as well as other administrative actions. I shall exclude:

(1) Those lenders who had their FHA approval immediately revoked for one yeardue to failing to meet the annual recertification requirements for HUD/FHAapproval, a list of 905 (sic) lenders; and(2) Those lenders that cured this same violation by coming into compliance and settled bypaying a $3,500 civil money penalty without admitting fault or liability, a list of 147 lenders.

In the list that follows, please note that administrative actions often result fromseveral violations of HUD/FHA requirements alleged by HUD, with discovery ofsuch violations, taken together, often determined by means of HUD’s routinequality assurance examination.

1. (a) Used official HUD Seal and FHA acronym on lender’s Web site; (b) violatedHUD’s advertising requirements when it misrepresented that its Web site wasowned and/endorsed by HUD; (c) continued to violate HUD requirements by dis-playing the Official Federal Housing Administration-Approved Lending InstitutionSeal (FHA Seal) improperly on its Web site and failed to accurately identify thelender as the owner of the Web site; and (d) failed to register the fictitious busi-ness name in violation of HUD requirements.Action: $30,000 civil monetary penalty without admitting fault or liability.


Avoiding FHA’s Mortgagee Review Board

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The 20 Year MistakeA Message From NAMB President William R. Howe, CMC, CRMSAfter almost 20 years of government-imposed confusion, consumers may finallyget a disclosure form that does not confuse them and not place mortgage brokersat a disadvantage in the marketplace. It appears the government is finally step-ping up to the plate and will try to merge the Truth-in-Lending (TIL) and GoodFaith Estimate (GFE) disclosures.

Here is the reason for my hope. On Aug. 2, 2010, U.S. Treasury SecretaryTimothy Geithner said the following, in reference to the language in the Dodd-Frank Act, which requires that within one year after the designated transfer date,the Consumer Financial Protection Bureau (CFPB) must propose a single, inte-grated disclosure for mortgage transactions combining disclosures for the Truth-in-Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA).”

“First, consumer protection. We want to move quickly to give consumers simpler dis-closures for credit cards, auto loans and mortgages, so that they can make betterchoices, borrow more responsibly, and compare costs. One of the ways we intend todo that is by combining the two separate and inconsistent federal mortgage disclo-sure forms that consumers currently get. Next month, we’ll convene mortgage com-

panies, consumer advocates, housing counselors and other experts to gather ideason how to do that. We’ll take the best ones, test them on consumers, and then soonbe able to unveil a new, easy to understand, federal disclosure form.”*Taken from http://www.treas.gov/press/releases/tg808.htm (link takes you to theentire speech).

One of the many battles the National Association of Mortgage Brokers (NAMB)has fought for years is the GFE and TIL disclosures. Former U.S. Department ofHousing & Urban Development (HUD) Secretary Mel Martinez was the first toattempt changing the GFE. NAMB members responded with thousands of letters tothe HUD Secretary addressing concern over the new document. We attended round-table meetings across the country attempting to give input into the process andwere promised consumer testing. As we saw the HUD tests, they had to bury an ini-tial test where they did not show indirect compensation (yield spread premium) andthe consumer success at picking the cheaper mortgage jumped into the 90 percentrange. The result is our current three-page GFE, grouping costs into blocks, and dis-closure of indirect compensation so complex it confuses attorneys from Wall Streetto Main Street. If consumer testing was really done on this new document, I wouldcertainly like to have attended one of the testing sites as a consumer.

The new document is not simplification. In fact, the old one-page GFE is nowcalled the Initial Fees Worksheet, but is really the same form with the namechanged. We should conduct a survey on how many of us still use the GFE, or wait,I mean the Initial Fees Worksheet, to explain the cost to a consumer.

HUD was very proud when the new three-page GFE was unveiled. They hostedWebinars for brokers and lenders. It turns out that the lenders had to put onWebinars for the brokers as well because they heard something different from HUDthan what the brokers heard. Additionally, NAMB has received many complaintsfrom across the country from our members about the problem of double-countingthe mortgage broker indirect compensation. Who has the complaint line for spe-cific answers … the Federal Reserve Board or HUD? Or, does anyone really haveany authority, except for the lender we are submitting a loan to, since in the end,all lenders must default to protection of their corporate brand. This is the price ofconfusion where the government tries to step in without considering the unin-tended consequences of their action, just as they did in 1992, when they decidedto require disclosure of information that still confuses consumers to this day.

Basically, consumers need about four pieces of information to make a decisionon a mortgage product that was originally one page.

The Truth-in-Lending Act (TILA) of 1968 is a U.S. federal law designed to protect con-sumers in credit by requiring clear key terms of the lending arrangement and all costs.Regulation Z is the implementing regulation of the statute (we all knew this because ofthe SAFE Act education classes we passed). The sole purpose of TILA is to promote theinformed use of consumer credit by requiring disclosures about its terms and costs, tobe standardized, calculated and disclosed on a consumer’s principal dwelling.

After seeing what happened to the GFE, I, for one, cannot wait to see what hap-pens to merging the GFE and TIL disclosure. Combining these two forms is going to benothing short of magic to make them understandable to a consumer. Again, I hopeto be part of the consumer testing since I missed out the first time. How about you?Actually, I do look forward to a new, easy to understand, Federal Disclosure Form.

Please join NAMB when we take this opportunity to make our case against thatdisclosure of our indirect compensation (what we call YSP). It only confuses con-sumers and places mortgage brokers at a competitive disadvantage with origina-tors in banks, credit unions and lenders. In fact, NAMB has created several dis-closure forms over the years that we believe are better for consumers than theones we deal with today. In the next few weeks, NAMB will be placing these sam-ple disclosure forms online so you can give us your opinion of each. Perhaps wecan come up with an even better form we can take to Treasury Secretary Geithner.

William R. Howe, CMC, CRMS is president of the National Association of MortgageBrokers and president of Scottsdale, Ariz.-based Howe Mortgage Corporation. Hemay be reached by e-mail at [email protected].

For more information on the National Association of Mortgage Brokers, visit www.namb.org.

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NAMB Honors Award Winners at Mid-Year Meeting in Phoenix

NAMB Director and Government Affairs Committee ChairMichael Anderson, CRMS of Essential Mortgage in Baton Rouge,La. is congratulated by NAMB Treasurer John Councilman,CMC, CRMS of AMC Mortgage Corporation in Fallston, Md. onwinning the NAMB 2010 Broker of the Year Award

NAMB Vice PresidentDonald J. Frommeyer,CRMS of AmtrustMortgage Funding Inc. inCarmel, Ind. is recognizedby John Councilman asone of the finalists for theNAMB 2010 Broker of theYear Award

NAMB 2010-2011 President William R. Howe, CMC, CRMS ofHowe Mortgage Corporation in Scottsdale, Ariz. discusses his

goals for his term as association president

NAMB Past President Harry Dinham is recognizedwith the 2010 Distinguished Service Award by fellowTexan and NAMB Immediate Past President Jim Pair

The presidents exchanging pins asImmediate Past President Jim Pair(right) passes the gavel of associationleadership on to 2010-2011 PresidentWilliam R. Howe (left)

John Councilman (right) recognizes NAMB Director andEthics & Professional Standards Committee Chair OlgaKucerak, CRMS from Crown Lending in San Antonio, Texas(left) as a finalist for the NAMB 2010 Broker of the YearAward

Donald J. Frommeyerproudly accepts the NAMB2010 Volunteer of the Year

Award from ImmediatePast President Jim Pair

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the FHA or sold to Fannie and Freddie.This means that the federal governmentis essentially subsidizing 95 percent ofthe entire U.S. mortgage market. Thegovernment does not want to be in themortgage business. At some point, thegovernment subsidy will wind down andmortgage rates will go higher. This is yetanother reason why fence-sitters shouldjump off that fence and get moving.

Gibran Nicholas is the founder andchairman of the CMPS Institute(CMPSInstitute.org—NMLS Provider ID#1400384). The CMPS Institute administersthe Certified Mortgage Planning Specialist

(CMPS) designation and has enrolled morethan 5,500 members since 2005. ThroughCMPS, Gibran empowers mortgage profes-sionals with confidence, unique knowl-edge, and dynamic marketing resources tosimplify compliance, increase their com-petitive advantage, and generate morebusiness. Visit Gibran’s blog and Web siteat http://gibrannicholas.com.

Visit author Gibran Nicholas’sblog at http://gibranni-cholas.com where he shares

his insights on economics, realestate and financial issues, including thecurrent mortgage and credit crises.

trend spotter continued from page 12

2. (a) Used the official HUD Seal on its Web site and (b) improperly implied that itwas affiliated, connected or had authorization from HUD for its Web site.Action: Six months probation and imposing a $7,000 civil money penalty.

3. Failed to implement a quality control plan and conduct quality control reviewsin accordance with HUD/FHA requirements.Action: $7,500 civil money penalty without admitting fault or liability.

4. Closed its only approved office and failed to notify HUD.Action: Permanently withdrawing FHA approval.

5. (a) Failed to report all delinquent loans to HUD no later than the fifth businessday of the following month; (b) failed to correct fatal errors that resulted from itsmonthly reporting to HUD’s Single Family Default Monitoring System; (c) failed tocomply with HUD/FHA’s default servicing reporting requirements when it failed totimely submit a default servicing report; (d) failed to fully implement its qualitycontrol for oversight over this functional area.Action: $700,000 administrative payment to HUD without admitting fault or liability.

6. (a) Improperly used a simulated government form and seal to imply that corre-spondence relating to HUD’s Home Equity Conversion Mortgage (HECM) programwas from, or endorsed by HUD/FHA; (b) misrepresented HUD program require-ments in an advertisement by informing recipients that they were “entitled” tomonthly benefits through the HECM program.Action: Six month probation without admitting fault or liability and $11,000 civilmoney penalty.

7. Failed to notify HUD that its business licenses had become inactive and revoked.Action: Permanently withdrawing FHA approval.

8. (a) Failed to comply with HUD’s requirements concerning Principal-AuthorizedAgent relationships by permitting loans to close in the name of an authorizedagent; (b) failed to comply with HUD’s requirements when it charged borrowers abroker fee for loans it originated and also charged an origination fee, thus receiv-ing a total loan origination fee in excess of the fee permitted by HUD.Action: $277,500 civil money penalty and refund broker fees charged to borrowerstotaling $147,589.81 without admitting fault or liability.

9. (a) Failed to implement a quality control plan in compliance with HUD/FHArequirements; (b) failed to provide a clear and effective separation between lenderand an “identity of interest” life insurance company; (c) failed to comply withHUD/FHA housing counseling requirements.Action: $97,500 civil money penalty and permanently withdrawing FHA approval.

10. (a) Failed to comply with HUD’s requirements concerning the registration of“doing business as” (d/b/a) name in the states in which it was doing business and

regulatory compliance outlook continued from page 13


Avoiding Deals WithProperty Value Issues

If we could somehow collect and reinvestall of the resources wasted on potentialloans that do not close due to unrealisticproperty value exercitations, we wouldbe wealthy individuals. This is especiallytrue in today’s environment of under-writer skepticism and the tightening ofstandards due to the recent mortgagemeltdown. We are not talking aboutappraiser mistakes that do occur fromtime to time. We are talk-ing about circumstanceswhere the property valuesimply is not there.

Wouldn’t it be nice ifwe had a list of red flagsto watch for to help pre-vent wasting our timeand expenses on dealsthat are dead upon thearrival of the borrower’sapplication? Due to theart involved in appraisals,there is no surefire way ofknowing the value thatthe appraiser will comeup with prior to simplypulling the trigger andfinding out. There are,however, danger signs,and by being familiarwith these signals, thereare preventative actionswe can take in most cases. Below arequestions designed to detect some ofthese signals:

1. Do the property tax records reflect avalue below that which must be met byan appraisal of the property?

2. Is the house well maintained?

3. Has the property been sold lately? Ifso, did the sales price reflect a valuelower than that which must be reflect-ed in an appraisal in order to make theloan?

4. Has the property been appraisedwithin the past couple of years? If so,

when, and what was the estimatedvalue?

5. Has the local market experiencedmore foreclosures than usual?

6. Is the economy in the area stable? Isunemployment relatively high, or arethere plant closings near the subjectproperty?

The above signs are notwithin themselves offeredto be foolproof. As anappraiser and one whodeals with appraisals andappraisers on a regularbasis, I would be the firstto say that there are differ-ences in appraisal-valueestimates, strictly due tothe different opinions ofthe appraisers. Said inanother way, a given prop-erty on a given day mayhave a materially differentestimated value, depend-ing upon the appraisersinvolved. That does notmean that either appraiseris biased or less competentthan another.

Sometimes, it is just amatter of how one professional views agiven market, as opposed to how anoth-er views it or the experiences that oneappraiser has had, versus those of anoth-er. It should be noted, however, thatwhen there are glaring red flags, mostappraisers will have similar opinions ona given property.

Therefore, while a loan officer cannotexpect to do a perfect job in reading howa particular appraiser will view a givenproperty, it is possible to sort out manyunqualified loan applicants prior to theinvestment of large amounts of time andemotional energy, only to find that mostany appraiser would have nixed the deal.

By Charlie W. Elliott Jr., MAI, SRA

“Wouldn’t it be nice ifwe had a list of red flagsto watch for to help pre-vent wasting our timeand expenses on dealsthat are dead upon the

arrival of the borrower’sapplication?”


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The SAFE Call Report: Feels Like a PunishmentThe SAFE Act addresses the “Call Report” with a brief (some would say ambigu-ous) mention by stating: “Each mortgage licensee shall submit to the NationwideMortgage Licensing System and Registry reports of condition, which shall be insuch a form and shall contain such information as the NMLSR may require.”

The SAFE Act provided no further detail on the subject of Call Reports,leaving its purpose, structure and implementation to the NMLS to define. Anddefine they did, giving a whole new meaning to the cliché, “Give them andinch and they’ll take a mile.” We are living through post-housing-bust regu-latory mania. Never underestimate the bureaucrat’s appetite for mandatingredundant reporting and duplicative data. The financial Condition Report re-quires a glossary of 118 explanatory terms just to fill out the form.

In its commentary to the NMLS, one member of the American FinancialServices Association (AFSA) stated, “It will take 140 additional quarterly ac-counting reports for a total of 560 additional reports per year.” Whole new de-partments will have to be created in order to comply and much of theinformation’s usefulness can easily be challenged. The “Call Report” is adoozy. This one feels like a punishment.

PurposeThe purpose of the NMLS Call Report is to provide timely, comprehensive anduniform information concerning the financial condition of licensed mortgagecompanies, their loan activities and production information. The proposedrules call for a company with one or more licenses in any “approved” status tofile the NMLS Call Report on a quarterly basis with the following objectives:

� To replace unique state annual reports and standardize financial state-ment information;

� Provide state regulators with information to supervise licensed produc-tion volume and calculate assessments; and

� Give state regulators the ability to develop statewide reports on mortgageactivity with the ability to compare across state lines.

Two parts to the Call ReportThe Call Report is comprised of two parts and will roll out in 2011.

Part 1—Residential Mortgage Loan Activity Report: Shall be state by state,will include volume and reports on all first and subordinate loans includingspecific government loans, both forward and reverse.Part 2—Financial Condition Report: Will be reported on a year-to-date basis andis to include a current balance sheet, income statement and cash flow statement.

Failure to submit the Call Report within 45 days of the end of each calen-dar quarter will result in a deficiency to be placed on the company’s licenseand may result in state regulatory action. At a minimum, such a deficiencywill prevent license or registration renewal.

One possible upside is that for smaller entities operating in states that re-quire self-prepared financial statements on an annual basis, the NMLS Call Re-port may be used to meet this requirement.

SAFE observationNo doubt this little-mentioned SAFE Act provision morphed into an onerousregulatory requirement. It remains to be seen if it yields meaningful resultsor inflicts more punishment. On SAFE Act Call Reports, call me skeptical.

Paul Donohue, CRMS is a 23-year industry professional and founder of Abacus MortgageTraining and Education. Paul served on two NMLS working groups, establishing the newnational education protocols. Go to AbacusMortgageTraining.com to find out moreabout your obligations for testing, education and licensure, or call (888) 341-7767.


management began to gather informa-tion on the investment bank’s sub-prime exposure for purposes of possi-ble public disclosure. From the outsetof these efforts, internal documentsdescribing the investment bank’s sub-prime exposure included the supersenior CDO tranches and the liquidityputs, while noting that they bore littlerisk of default. Nevertheless on fouroccasions in 2007, Citigroup stated thatits investment bank’s sub-prime expo-sure was reduced to $13 billion from$24 billion at the end of 2006—with-out disclosing the more than $40 bil-lion in additional sub-prime exposurerelating to the super senior CDOtranches and liquidity puts. These occa-sions included a July 20 earnings call, aJuly 27 Fixed Income investors call, anOct. 1 earnings pre-announcement,and an Oct. 15 earnings call.

“Citigroup’s improper disclosurescame at a critical time when investorswere clamoring for details about WallStreet firms’ exposure to sub-primesecurities,” said Scott W. Friestad, asso-ciate director of the SEC’s Division ofEnforcement. “Instead of providingclear and accurate information to themarket, Citigroup dropped the ball andmade a bad situation worse.”

According to the SEC’s order institut-ing administrative proceedings againstCrittenden and Tildesley, they wererepeatedly provided with informationabout the full extent of Citigroup’s sub-prime exposure. Crittenden received adetailed briefing on valuation issuesrelating to the super senior tranches ofCDOs in early September 2007.Tildesley received information thatsame month that discussed the possi-bility that Citigroup’s disclosures couldbe misleading because they did notinclude the amounts of the super sen-ior tranches and the liquidity puts. TheSEC’s order finds that both Crittendenand Tildesley helped draft and thenapproved the disclosures that wereincluded in a Form 8-K filed with theSEC on Oct. 1, 2007. The SEC’s orderfinds that, in doing so, Crittenden andTildesley caused Citigroup’s filing to bemisleading to investors.For more information, visit www.sec.gov.

HUD and the TreasuryDepartment announcenew monthly housingscorecard

The U.S. Departmentof Housing & UrbanDevelopment (HUD) andthe U.S. Department ofthe Treasury have intro-

duced a monthly scorecard on thenation’s housing market. Each month,the scorecard will incorporate key hous-ing market indicators and highlight theimpact of the Administration’s unprece-dented housing recovery efforts, includ-ing assistance to homeowners through

the Federal Housing Administration(FHA) and the Home AffordableModification Program (HAMP). Thisscorecard contains key data on thehealth of the housing market including:

� After 30 straight months of declineand an expectation of continuednearly 14 percent decline, homeprices leveled off in the past yearand expectations have adjustedupward.

� Mortgages are more affordable: Dueto historically low interest rates,more than six million homeownershave refinanced, saving an estimat-ed $150 per month on average andmore than $11 billion in total. Andmore than 2.5 million families havepurchased a home using the First-Time Homebuyer Tax Credit.

� Servicers report that the number ofhomeowners receiving restructuredmortgages since April 2009 hasincreased to 2.8 million. Additionally,nearly half of homeowners unable toenter a HAMP permanent modifica-tion enter an alternative modificationwith their servicer, and fewer than 10percent of cancelled trials move toforeclosure sale.

The housing scorecard now incorpo-rates the monthly Making HomeAffordable Program Servicer PerformanceReport, including HAMP modificationdata that once again shows a month-over-month increase in permanent modifica-tions, with average growth of roughly50,000 permanent modifications permonth over the last four months.Servicer data indicates close to half ofthe homeowners in HAMP trial modifi-cations who were ultimately ineligiblefor a HAMP permanent modificationwere offered an alternative modifica-tion and less than 10 percent move toforeclosure sale In addition to the mod-ifications through HAMP, servicers haveadopted the HAMP guidelines as anindustry standard and are now initiatingtheir own modification agreementsincorporating many of the HAMP afford-ability principles.

The housing scorecard details newreporting on both the scope ofTreasury’s compliance activities andthe areas of focus for compliancereviews under HAMP. Complianceactivities include on-site reviews, filereviews and reviews of net presentvalue (NPV) model applications. Alsoincluded are the first-ever results ofcompliance-related “second look”reviews of select servicers to ensurethat potentially eligible borrowers weresolicited and properly evaluated forHAMP. Treasury’s compliance activitieswill lead to improvements in servicerperformance and process improve-ments designed to minimize the likeli-


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• Nationwide Appraisal Company• FHA and HVCC Compliance• Appraisals• BPO’s• AVM’s• National Vendor Network• RealEC Integrated• In Business Since 1970

888-485-1999 Ext. 2www.coesterappraisals.com

For those seeking to take the pre-qualification process a step further,there are also helpful collateral-assessment tools that mortgage pro-fessionals can use to supplement theirknowledge of a given market prior tomaking the commitment go throughthe application process. These toolsinclude the automated valuationmodel (AVM) and access to localMultiple Listing Service (MLS) compa-rable sales data. With these tools, themortgage professional can get a roughpreview of the comparable sales data,which will be used by the appraiser todevelop the appraisal.

The customer can also be a resourcein assisting with the preliminary evalua-tion of their collateral. A good questionto start with is: “What has sold in yourneighborhood that will support youropinion of the value?”

In summary, mortgage professionals

owe it to themselves to perform a cer-tain amount of due diligence prior tomaking the commitment to carry anapplicant through the formal applica-tion process. Savvy loan officers, in somecases, will spot problems early on in theprocess and save themselves time andemotional energy. Even though, typical-ly, the lender officer does not spend alot of out-of-pocket money on a failedapplication, time is often wasted, andtime is money. Simply passing on poten-tial borrowers with insufficient collater-al and servicing those with the propercollateral can be best for the lender andthe borrower.

Charlie W. Elliott Jr., MAI, SRA, is presidentof Elliott & Company Appraisers, a nation-al real estate appraisal company. He canbe reached at (800) 854-5889, e-mail [email protected] or visit his company’sWeb site, www.appraisalsanywhere.com.

value nation continued from page 16

Again and again in this column, wehave discussed how hard it is to pre-dict the future. However, when youpay economists the big bucks, theyhave to lay it out on the table. Not thatyou, as a mortgage professional, getbig bucks for making predictions, butwhen you enter a real estate office forsome reason, real estate agents andcustomers seem to think you can pre-dict the future better than they can. Iused to carry one of those Magic 8-Balls when I made a presentation toagents. Why? I knew the question wascoming: “What is going to happen torates?” When the question came, Icalmly took out the ball and askedwhat day are they looking to predict?Then, I shook the ball and got ananswer such as “Not Today.” We alllaughed and it was fun.

It is not fun to be in a market inwhich you have no idea what will hap-pen tomorrow … not only in terms ofrates, but what lenders will be in busi-ness, what guidelines will be publishedand more. The only thing I am com-fortable predicting is that we will havechange in this industry (that has heldtrue for 30 years). You can add the factthat the Democrats and Republicanswill continue to fight and blame eachother. Not much help is it?

Many predicted an economic slow-down for the second half of 2010, buthow many predicted record low inter-est rates? Again and again, we pub-lished quotes from respected analysts

indicating that rates would be risingthis year. I remember getting e-mailsand calls from panicked loan officerswho attended a Webinar from a“respected industry expert” who pret-ty much said that rates would hit sixpercent by the end of the year. Nowbefore you go ahead and trash thatprediction, remember, there is stilltime until the end of the year. On theother hand, I will not be that boldbecause I recognize my own limita-tions. If I purchase a stock it goes inthe tank the next day.

Obviously, these predictions havenot come to light as of yet. Now manyare predicting that lower rates will staywith us for the foreseeable future,based upon the economic crisis inEurope and the flight to safety we areexperiencing as investors purchase U.S.Treasuries.

Our advice? Don’t get too comfort-able. Remember when many predictedthat housing prices had to fall basedupon the spectacular increases we sawjust a few years ago? The housing mar-ket kept on going, regardless of thesepredictions. Then, it ended when fewwere expecting the end to come.Doesn’t it always happen that way?

Here is a recent quote from businessanalyst Allan Sloan in The WashingtonPost :

“Financial markets can make you lookreally foolish, even if you thought youranalysis was right, and still do. Today’s

More on Predictions

humbling example: The best investmentby far for the first half of this year hasbeen the one that people like me havebeen warning against: Long-term U.S.Treasury bonds. I’ve also said (and said)that you have to protect yourselfagainst a decline in the value of the dol-lar because our need to borrow hugeamounts to cover trade and budgetdeficits is eroding the greenback’s stand-ing as the world’s reserve currency. Butguess what: Even though it’s been acrummy year for U.S. stocks, the per-formance of foreign stocks has beenconsiderably crummier. What’s happen-ing, of course, is that we’re seeing asomewhat different version of the phe-nomenon in 2007-08, when scaredinvestors sought refuge in U.S. Treasurysecurities because they feared a world-wide financial meltdown. This year, it’sthe European problem that has prompt-ed investors to seek safety in Treasuries.All that money flooding into theTreasury market drove down the inter-est rate on long-term Treasury bonds.Hence, long-term Treasury bonds’ strongperformance for the first half of theyear—and our country’s ability tofinance its enormous deficits by sellingTreasuries at very cheap rate. How do Iexplain that my predictions have beenso wrong for the past six months?Simply this: In the long run, markets arerational. In the short run, anything canhappen. The tech stock and house pricebubbles lasted far longer than rational-ists expected them to, but they ulti-mately popped. So will the Treasury-bond bubble.”

By the way, this “mea-culpa” doesnot mean that Allan is right about abubble to be burst. What if we slide backinto recession? Rates could stay low.

We asked the opinion of our second-ary market expert Eric Holloman, chief

executive officer of RateLink, and headded this factor to the equation:

“These record low rates are causing themortgage-backed securities (MBS) pur-chased by the Federal Reserve Board topre-pay because of refinancing activity.This, in turn, is freeing up capital andgiving the Fed more flexibility in casefurther stimulus activity is necessary.”

Regardless, we advise you not to get toocomfortable. Again, no one can predictmarket turns. That is why a diversified mar-keting plan, which includes purchases andrefinances, makes all the sense in the world.And this is why I delivered an “OriginatingRefinances” Webinar in June, but the first ofJuly, scheduled a session, “TargetingRealtors to Increase Your Purchase MarketShare,” on Aug. 11. Just staying ready! If youwould like to register, log on to www.webi-nars.originationpro.com. By that date, Ishould be able to tell you what happened inJuly. But forget about asking me what willhappen in September!

Dave Hershman is a leading author for themortgage industry with eight books and sev-eral hundred articles to his credit. He is alsohead of OriginationPro Mortgage Schooland a top industry speaker. Dave’s CertifiedMortgage Advisor Program can be found atwww.webinars.originationpro.com. If youwould like to stay ahead of what is happen-ing in the markets, visit ratelink.origination-pro.com for a free trial or [email protected].

“I used to carry one of thoseMagic 8-Balls when I made a

presentation to agents. Why? Iknew the question was coming:

‘What is going to happen torates?’”

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★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★

★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★★

★★★★★★★★★★★★★★★★

★★★★★★★★★★★★★★★★

THE

MORTGAGEPROFESSIONAL

TRUSTED

By Greg Schroeder

In last month’s column, I discussed the need for a change in per-ception. This month, I’d like to talk about the need for a changein perspective … a broker’s perspective, to be precise. The pas-sage of the Dodd-Frank Act has many bemoaning the limits oncompensation for mortgage originators, the expansion of “cred-

itor” under the Truth-in-Lending Act (TILA) to include brokers, the increasedpenalties for non-compliance with the additions to TILA and so on. The final de-velopment and implementation of the regulations authorized by the passage of theDodd-Frank Act leave a lot of unanswered questions, yet there is no doubt thatdrastic changes are imminent. Once again, the industry is fervently predictinggloom and doom for the future of the broker channel.

This begs the question, “Where was this passion when financial reform was firstintroduced?” Brokers have had ample time to voice their opinion to sway legisla-tors to adopt their line of reasoning. Now, it’s too late to do anything about Dodd-Frank, and dwelling on that which cannot be changed is simply an exercise infutility. What I suspect is, at the heart of this belated panic, the realization that beinga broker today requires much more effort to achieve profits that are not even closeto what top brokers were pulling down at the height of the mortgage bubble.

Brokers, ye need not fear. There’s still money to be made in the broker game,but there are lots of hungry new players eager to stake their claim. The astro-nomical profits of days gone by can no longer be the measure by which brokersgauge success, and those veterans who are willing to stay in the game have to beprepared to work even harder for their money. Like the rest of the country, bro-kers must redefine what it means to be financially successful.

It’s tempting to look back longingly at a simpler time, but reminiscing on what oncewas will not make the current situation look or feel any better. However, if the past canteach us anything, it is that there is strength in numbers. The National Association ofMortgage Brokers (NAMB) has lost a lot of its membership due to the misplaced mediacharacterizations that the mortgage broker was the culprit behind the mortgage messwith the resulting economic downturn. Now, NAMB struggles with the rest of us tosurvive, however, there could be no better time for the surviving and thriving brokersto support NAMB and band together once again for the greater good of all.

For man to survive, political theologian Thomas Hobbes says each must giveup his or her right to self-determination and enter into a covenant or social con-tract for governance in order to protect the rights of all. It’s time for brokers to takea page from Hobbes and re-enter into a contract with each other for the preser-vation of the channel as a whole. Without any sort of governing body, brokershave no hope whatsoever of fighting reactionary legislation that could threatenthe very existence of this vibrant and much-needed origination channel. Whilethe Mortgage Bankers Association (MBA) is certainly active in Washington, D.C.on behalf of the industry, its membership is too diverse to be a truly effectivevoice for brokers alone.

If brokers ever hope to regain their status as Trusted Mortgage Professionals andprotect what moneymaking ability they have left, they must be willing to change theirperspective on what it means to be a broker in today’s economy and work both harderand smarter to achieve success for themselves individually and the industry at-large.

Greg Schroeder is president of Comergence Compliance Monitoring. To learnmore about how the Comergence Compliance Trusted Mortgage Professionalprogram can help, call (714) 495-4720.

Tough Times and Getting Tougher?Why Dodd-Frank should serve as a wake-up call to brokers



with the Department; (b) improperly used the HUD seal on its Web site; (c) failed toensure that loan applications were taken and processed by lender’s employees; (d)approved loans where borrowers failed to meet HUD’s minimum credit require-ments because lender failed to provide adequate explanations for the derogatorycredit; (e) failed to adequately document the stability and/or source of income usedto qualify for loans; (f) failed to adequately document the source of funds used toclose loans; (g) approved loans with debt-to-income ratios that exceeded HUD stan-dards without significant compensating factors and/or explanations; (h) chargedborrowers excessive and impermissible fees; (i) failed to resolve discrepanciesand/or conflicting information in loan documents; (j) failed to complete qualitycontrol reviews for loans that were 60 days past due within the first six payments;(k) failed to have a written quality control plan as required by HUD/FHA.Action: $413,500, to indemnify HUD on 31 loans, and reimburse fees to 78 borrow-ers without admitting fault or liability.

11. (a) Used conflicting information in originating and obtaining HUD/FHA mortgageinsurance; (b) submitted false certifications on the HUD 92900–A, Addendum to UniformResidential Loan Application, which stated that an employee of the lender had obtainedthe information contained in the application directly from the borrower; (c) approvedloans where borrowers failed to meet HUD’s minimum credit requirements; (d) failed toadequately document the stability and/or source of income used to qualify the borrow-ers for the FHA-insured mortgages; (e) failed to document the source of funds used toclose the loan or to satisfy various omitted liabilities; (f) omitted liabilities from theunderwriting analysis without supporting documentation, approved loans with debt-to-income ratios that exceeded HUD standards without significant compensating fac-tors and/or explanation; (g) exceeded HUD requirements when calculating the maxi-mum insurable mortgage; (h) failed to process a loan in accordance with HUD policyon loans to HUD employees; (i) closed a loan with an excessive mortgage broker feepaid to an FHA-approved loan correspondent; (j) failed to provide the requiredVerification of Rent to support its loan approval decision; (k) submitted false certifi-cations to HUD in connection with the submission of its Yearly Verification Reportthat concealed administrative sanctions and investigations by two of lender’s stateregulators; (l) failed to notify HUD that one of lender’s employees was involved infraudulent FHA insured mortgage originations in a timely manner; (m) permitted aborrower’s Verification of Employment to be hand-carried by the borrower; (n)approved loans that were not in compliance with FHA appraisal requirements.Action: $512,500 civil money penalty.

12. (a) Chief executive officer and 25 percent owner was indicted in the UnitedStates District Court, when he was charged with one count of bank fraud for hisrole in a scheme to create fictitious loans and warehouse those loans; (b) failed tonotify HUD of the indictment; (c) failed to submit its Yearly Verification report.Action: Suspending lender’s HUD/FHA approval pending the outcome of a legal pro-ceeding for federal indictment.

13. Knowingly employed individuals who were debarred and/or had been con-victed of an offense that reflects adversely upon lender’s integrity, competence, orfitness to meet the responsibilities of an FHA-approved mortgagee. Action: Permanently withdrawing FHA approval.

14. (a) Approved and closed a loan where the spouse was added to title without regardfor debts and overall creditworthiness; (b) failed to perform quality control reviews ofloans that went into default within the first six months; (c) failed to notify HUD of abusiness change when it failed to notify HUD that it had closed its home office.Action: Withdrawing FHA approval for a period of one year.

15. (a) Permitted non-employees and/or mortgage brokers to participate in the loanprocess; (b) failed to adequately staff its office because it never had any employees; (c)failed to comply with multiple requests from HUD’s OIG Office of Investigation to makeits mortgage origination files available for review; (d) failed to provide evidence thatoriginal documents were reviewed, in that the loan files contained faxed documentswith no indication that lender received and/or reviewed the original documents, orwas able to clearly identify the source from which the documents originated.Action: Permanently withdrawing FHA approval.

16. (a) Failed to ensure that its employees were exclusive and did not have outsideemployment in the mortgage lending, real estate, or other related field; (b) failedto adequately document income, a stable two-year employment history, and otherforms of effective qualifying income; (c) failed to document significant compen-sating factors for loans that exceeded HUD’s debt-to-income ratio; (d) failed todocument the source and/or adequacy of borrower’s funds required to close the

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Each month, National Mortgage ProfessionalMagazine will focus on one of the industry’stop players in our “Mortgage Professional ofthe Month” feature. Our readers areencouraged to contact us by e-mail at [email protected] for considera-tion in being featured in a future “MortgageProfessional of the Month” column.

This month, we had a chance to chatwith Joe Amoroso, director of nationalsales, Real Estate Mortgage Network Inc.(REMN), headquartered in River Edge,N.J. A graduate of the State University ofNew York at Delhi, Joe began his careerin the hospitality and restaurant indus-try, eventually moving into the brokerbusiness in the late 1980s.

He began working for FairbankMortgage as senior vice president ofsales, and was instrumental in the start-up of the company’s wholesale channel.Ten years later, after Fairbank closedshop, Joe moved on to Northern StarMortgage, which eventually becameHome Star, and finally became OpteumFinancial Services. Joe served as seniorvice president of sales at Opteum forseven years.

He was eventually recruited by Citi

Joe Amoroso, Director of National Sales, REMN-Real Estate Mortgage Network Inc.

Residential Lending as senior vice presi-dent of sales to handle the company’smerger with Argent Mortgage/Ameriquest.Joe remained with Citi and worked on theteam responsible for merging Citi’s mort-gage units, Citi Residential Lending andCiti Mortgage. After a year-plus at Citiand a taste of what it was like workingfor a “big bank,” Joe signed on withSecurity Atlantic Mortgage Company asthe company’s national sales manager.Today, Joe serves as director of nationalsales for REMN, and while he and theother members of senior management atREMN run the company, a corporate cul-ture exists where it’s a transparent,hands-on experience for everyone …from senior management, to regionalmanagement, all the way to REMN’snetwork of brokers.

How did you first get started in themortgage industry?I started out in the hospitality industryover 25 years ago, and through the hos-pitality industry, my family owned anumber of restaurants in Connecticutand New York. I originally went toschool for hospitality management and

hospitality development, and I knowit’s a weird twist, but I grew tired ofoperating in the hospitality business. Igot into mergers and acquisitions andbusiness brokerage, and I specialized inselling restaurants, small hotels, whole-sale distributorships, etc.

I rented an office space adjacent to ahard money lender and my businesswas booming. All of a sudden, in thelate 1980s, the banks stopped loaningmoney to small business acquisitions,so my business dried up. I was done,and was forced to either go back intothe hospitality business or pursueanother career. So I went to the hardmoney lender down the hall andlearned the mortgage business. I usedhis broker’s license to start a shop. Iwould share my revenue with himbecause it was his license, as regula-tions back then were not quite as strin-gent as they are today.

I was giving him checks every month,and after six months, he asked, “What’sthis kid doing over there?” There was asignificant amount of money comingmy way, and I explained the mortgagebrokerage business to him. He was ahard money lender, and that’s all hedid, so it’s kind of funny how I got intothe business.

I was recruited to go to FairbankMortgage around 1990. They had a retailbusiness, but the wholesale channel wasjust coming of age, so we started awholesale business in the northeast andquickly became a regional player.

I was at Fairbank for nearly 10 years,as the Ford Consumer Finances of theworld, GE, Advanta and other largecompanies started popping up aroundus and it was interesting that we wereable to compete with a lot of thosecompanies. They were much bigger andhad deeper pockets than Fairbank.

Since the beginning of the wholesalebusiness, I have mostly been, until

recently, the little guy. I have alwaysworked for the little entrepreneurialwholesaler and competed mightily withthe big guys and it has worked out verywell. It was good for my skills not to haveall of the resources available, as youhave to make the best of what you have.

In the late 1990s, all the big compa-nies started to melt down and so didFairbank. Colony was the New Yorkname of the company, it was known asFairbank everywhere else.

I was recruited to join Peter Nordenand we started a wholesale company atthe time, called Northern Star. Webegan regionally, got our licenses andstarted to grow.

We changed our name from NorthernStar to Home Star, but eventually faced law-suits because the name Home Star wastaken. We did much research and chose thename Opteum Financial Services instead.

Opteum Financial grew to be a sig-nificant publicly traded, nationalwholesaler. I ran the eastern region ofthe country for Peter. We had a terrificseven- to eight-year run at Opteum.That was the first time I actually hadresources to work with … differentthings to actually grow a company, suchas marketing and bigger budgets. It wasalso at that time that we were able to sitback and watch all of the mistakes thatthe industry was making.

What was your next move?Opteum Financial Services was in businessfor about seven years, 2000-2007, and I

“This is, by no means, Armageddonfor mortgage brokers, but it has cer-tainly cleared out the men from theboys and has forced quality in orig-

inations and has stepped up thestandards of underwriting.”

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SEEKING ACTIVEMORTGAGE BANK FOR

ACQUISITIONI have a client that is actively looking to purchase a Mortgage Bank li-censed in at least, New Jersey, New York, and Pennsylvania. The re-quirements we have include a low FHA “Compare Ratio,” minimumof two existing warehouse lines in good standing, and at least threecorrespondent lender relationships that are also in good standing,with at least one being an “A” Tier investor. Must have full eagle.

The owner/partner will need to be able to stay on until the changeof control is completed for quality control purposes. There will becompensation paid during that time frame. There will be a qualitycontrol workflow to insure low exposure. Our management team isin place to make it a seamless transition. We would also considermerging our management team with the existing management teamif the situation is right.

We will use our net-worth to secure the warehouse lines when thechange of control is complete.

We are very open and willing to hear any situations, business plans, of-fers, etc. Please email me at [email protected] with a goodtime to discuss this, or call me anytime at (631) 835-0000. I look forwardto hearing from you.

Very truly yours,

Tricia A. Odierna, Esq.

LAW OFFICE OF TRICIA A. ODIERNA

2150 JOSHUA’S PATH, SUITE 202HAUPPAUGE, NY 11788

then moved onto Citi. I was recruited byCiti for the sole purpose of working ontheir acquisition of Argent MortgageCompany. I was actually placed in Argentand I worked there for nine months dur-ing the acquisition process, doing duediligence for that deal. This experiencegave me exposure to not only the Citi cor-porate world, but the world of Argent andits parent company, Ameriquest, as well.The resulting company after the Argentpurchase was named Citi ResidentialLending and I ran their sales department.

What was it like working for a compa-ny as large as Citi Residential Lending?It was both fun and exciting to work for abig company … and talk about resources… they had a lot of resources, but thechallenge at Citi was you couldn’t just goand tap into those resources, whereaswith Opteum Financial Services, yourresources could be easily tapped into. Itwas a very “corporate” atmosphere, amore corporate lifestyle than I was accus-tomed to, and one in which everythingtook a village to accomplish something.

Then, Citi decided to merge CitiMortgage and Citi Residential Lending,so I was put on the merger team tobring the two entities together. Therewere still remnants of the Argent andAmeriquest culture there, my job wasto assist with the merger.

After my work on the merger, I wasoffered a position at Citi Mortgage asdirector of expanded lending. I stayedwith Citi until they again re-organized, andI left to again to join a wholesale platformwhich is now part of REMN wholesale.That was approximately two years ago.That’s how we got to where we are today.

What are some of the tricks in merg-ing two different corporate cultures?It’s truthfully a complicated process dueto what is going on in the industry. Youhave the changing of a corporate envi-ronment taking place, along with thetotal re-engineering of the mortgagelending landscape. You really have to lis-ten and be very open-minded aboutwhat is taking place. You have to look atthe two platforms and put the ego of thecompany aside and select the best cul-ture, listening to both sides.

You can have a small company thatis running fine on all cylinders opera-tionally and is doing great in the salesdepartment, but to scale it to a largerlevel is a whole new animal. Not everycompany is scalable. It’s all trial anderror and you do make mistakes, butyou must amend them and move on.

How does this trickle down to small-er mortgage brokers and bankersthat are facing similar situations withmergers and acquisitions? Some aretaking their independence and part-

nering with someone or becomingpart of a larger organization throughbranch opportunities. Do you haveany specific advice for these inde-pendent originators?Some of the same elements that existwhen you work blending the cultures ofbig companies together also exist on thesmaller scale with brokers and bankers.I would say the same thing exists: Youhave to do what’s right for yourself andput your ego aside a little bit. You mustmake your decisions based on the actu-al fundamentals of today’s world. As abroker or a banker, you must decidewhat’s right for you and your employ-ees, and not only what’s right for todayor to get the company through themonth, but what will get you throughthis next cycle of business as well.

What has led you to stay so commit-ted to the wholesale channel and thebroker channel?I am, without any question, a business-to-business guy. I appreciate and enjoy work-ing with other businesses, as opposed toconsumers. Granted, my customers are thepeople who deal with the consumers, so Ineed them. I truly enjoy doing businesswith the broker. I enjoy how different bro-kers run their businesses and how theymarket for deals, and I’m intrigued withthe whole retail sector. Although I’m inwholesale and that’s my commitment, Ihave to consider myself a retail guybecause my customers are retail.

I was involved for many years with theConnecticut Mortgage Bankers Association(CMBA), and that involvement exposed meto the mortgage business on a granderscale. Just sitting in on meetings and talk-ing with wholesale and retail mortgageprofessionals was very intriguing.

What is different about REMN com-pared to other wholesalers out there?Prior to the re-engineering of ourindustry, there were multiple layers ofmanagement. The industry, at its peak,could afford to have regional salesmanagers, area sales managers, divi-sional sales managers, and on and on,and everyone was fat and happy.

Here at REMN, we have a differentoutlook on things, as we have about 50account executives on the road nation-ally. We have a huge presence on theEast Coast, the Midwest, in theSoutheast, the Mid-Atlantic states, andwe’re just really only just getting intothe Texas and California regions.

The bottom line is that it costs moreto originate a loan today than it didthree years ago … a lot more, and byvirtue, you’ve got to run your businessa little bit leaner and a little meaner.

Our management structure is prettysimple at REMN. I’m the national direc-tor of sales, then there is the national

sales manager, Carl Markman, andthen we have five regional sales man-agers out there who are functioningsalespeople. They actually haveaccounts and they manage accounts, aswell as account executives. The salesstructure is limited management, withmajor league access to the people whorun the company. By “major league,” Imean there are no levels to go through.

Carl and myself have day-to-daytransactional exposure to our accountexecutives. It’s no longer a situationwhere somebody is running a companyand nobody ever talks to them or getsface time with them because they are sofar removed. A true benefit of a mana-gerial structure like we have here atREMN is that I consider myself in thetrenches with what’s going on with thebroker market because we are so closeto our account executives.

How does the quality of the filesbeing submitted by brokers todaycompare to the quality of the filessubmitted just five years ago?Overall quality is drastically improved. I

hate to say it, but just five years ago, therewere those who were not true mortgageprofessionals involved with the mortgagebusiness. They jumped in and made a lotof money, and as a result, we as whole-salers were feeding Wall Street’s insatiableappetite for the paper that was being writ-ten. In many cases, the problem actuallystarted in the field with the applicationbeing taken and then submitted to thewholesaler … the app was likely notproperly processed or processed to a less-er quality. When it got to the wholesalelevel, investors were not as stringent asthey are now. That mediocrity permeatedfrom someone’s kitchen table or Internetsite to the time when a poor quality filewas submitted to the investor. .

The people who were not seriousabout the business and were in it tomake a quick dollar are gone for themost part. The people who remain arethe true fighters of the industry whohave survived and are serious about themortgage industry. They are seriousabout the continued existence of theindustry.

You have got to deliver quality loans.We are a Ginnie Mae securitizer, qualityis paramount to us, whether we aresecuritizing a loan or selling a loan to aninvestor.

The industry has been cleaned up, butthat cleanup has come at an enormouscost. REMN alone has 20-30 additionalemployees than just a year ago in order to


“… I think for a well-run mort-gage broker company that runs

their business considering compli-ance and delivering quality loansto the secondary market, there is

enormous opportunity.”

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mortgage professional continued from page 21

make sure that we are producing higherquality files. There are more checkpointsand more technology is involved.

I recently attended a few industrytrade shows, and they were not mobbedlike they were four to five years ago. Thepeople who came to our booth to talk tous were concerned about the ongoing via-bility of the business and wanted to seeour business continue to thrive. It’s defi-nitely quality, not quantity, showing up atthese trade shows, and Ithink that’s kind of what’shappening in the business.

Due to the past sins ofWall Street, do youthink that there will bea total removal of thatsin in the future as ourgovernment enacts itsvarious forms of finan-cial reform legislation?I’ll admit that I do notknow all the parameters ofthis legislation, and I don’tthink anyone truly doesknow this legislationthrough and through. Ithink financial reform isone thing, but what Iwould like to see is overallmortgage reform.

Just talk about the cost of doing busi-ness as a wholesaler these days ... if you dobusiness in multiple states, and REMNdoes business in more than 40 states, eachone of them has different licensingrequirements. Each state has differentrules and regulations, from a disclosurestandpoint, from a net worth standpoint,all these types of things. Those require-ments, and again, there are many, costmoney. Being a multiple state lender is anexpensive proposition because you’ve gotto be able to navigate through all of thesedifferent rules. Our computer system costa fortune in order to remain in compli-ance in 50 different states, however, thesecosts are necessary. If there was nationalmortgage reform and everything was uni-formly put on the table, it would probablytranslate into bringing the price of a mort-gage down for the consumer.

The Secure and Fair Enforcement forMortgage Licensing Act (SAFE Act) and theNationwide Mortgage Licensing System(NMLS) are a big step forward in ensuringthat the consumer is dealing with a com-petent and qualified loan officer.

Do you think actually that there areother regulations that are comingdown the pipe specifically for themortgage broker? With all of the financial reform out there,I can understand why people are gravi-tating more toward branch opportuni-ties. But, I think for a well-run mortgagebroker company that runs their businessconsidering compliance and deliveringquality loans to the secondary market,there is enormous opportunity.

Do brokers who work with REMNhave access to training?Yes, we do assist with training. We alsohave an online help desk. We actually havetwo trainers who work out of our head-quarters. We recently did another GoodFaith Estimate (GFE) training session for ouraccount executives because we think it’scritical that they know all the changes tothe GFE, through and through. We havehour-long teleconferences for all of our

account executives nation-wide so that they canreview the GFE situation.Whenever we roll out newproducts, we train them onit. We are training ouraccount executives so thatthey can train their brokers.

What would you say arethe top three things bro-kers consistently makemistakes on with thenew GFE?The ones that comeimmediately to mind arethe mistake in the upfrontmortgage insurance pre-mium (MIP). We see bro-kers not properly puttingthe yield spread premium

(YSP) in the borrower credit section, andthe other thing that we see quite a bit isthat the mortgage transfer taxes are putin the wrong boxes. In some states, it’s amoot point, but in New York, it’s a bigone.

Why should a broker do business withREMN as opposed to another wholesaler?The big guys do a wonderful job atwhat they do. We put ourselves in atotally separate category. The level ofservice and communication you getfrom REMN is far superior to that ofwhat you get from the bigger compa-nies out there. I’ll specifically give youan idea of what I mean by that.

We’ve been interviewing and recruit-ing account executives nationwide.When I ask them why they are sittingacross the table talking to me andinterested in working for REMN … theirmain reason is turn times. Our accountexecutives are in broker shops all dayand they know the service levels outthere with the bigger competitors ofours. We have built our entire companyupon same-day turn times on new filesthat are submitted. So, if a file is sub-mitted to REMN by 11:00 a.m., you willget an answer on that file that very sameday. That is one of the cornerstones ofwhat we do.

If you were a broker and you get yourbusiness from Realtors, it’s a beautifulthing to be able to send a file to REMN,and that day, the worst case the nextday depending on the time the packagewas submitted, you will have an answer



loans; (e) failed to include all of the borrower’s liabilities in loan qualification forloans.Action: $68,500 civil money penalty and indemnifying HUD on nine loans withoutadmitting fault or liability.

17. (a) Failed to maintain and implement a quality control plan in compliance withFHA requirements; (b) failed to ensure that quality control reviews were conductedon loans that went into default within the first six months; (c) failed to resolve dis-crepancies and/or conflicting information in the origination of loans; (d) failed to doc-ument a stable two-year employment history and other forms of effective income onloans; (e) approved loans with debt-to-income ratios that exceeded HUD standardswithout significant compensating factors; (f) failed to calculate income properly onloans; (g) approved loans that did not meet minimum credit requirements; (h) omit-ted revolving and installment debt liabilities on loans without documenting that thebalance had been paid or otherwise should have been excluded; (i) allowed anappraiser who was not on the FHA Roster to appraise a home on a loan; (j) failed toensure that loans met the eligibility requirements for FHA insurance; (k) exceededHUD requirements when they calculated the maximum mortgage amount.Action: Permanently withdrawing FHA approval and imposing a civil money penal-ty in the amount of $674,000.

18. (a) Permitted a third-party to originate HUD/FHA insured mortgage loans, andsubsequently submitted false certifications to HUD that these loans were originatedby a full-time employee; (b) failed to implement a quality control plan in compli-ance with HUD/ FHA requirements; (c) failed to maintain quality control reports asrequired by HUD/FHA; (d) failed to document the borrower’s income in accordancewith FHA requirements; (e) charged a borrower an unallowable tax service fee.Action: $168,500 civil money penalty without admitting fault or liability.

19. (a) Failed to perform a quality control review on loans that went into defaultwithin the first six payments; (b) failed to adopt and maintain a quality controlplan in accordance with HUD/FHA requirements; engaged in a prohibited brancharrangement; (c) made false certifications on the form HUD–92900–A Addendumto the Uniform Residential Loan Application (URLA); (d) failed to comply withHUD/FHA requirements for home office operations; (e) failed to report compensa-tion to an employee on IRS form W-2; (f) failed to process Verifications ofEmployment (VOE) on loans in compliance with HUD/FHA requirements.Action: Permanently withdrawing FHA approval and imposing a civil money penal-ty in the amount of $124,000.

20. (a) Hired loan officers as independent contractors and reported their compen-sation on IRS form 1099’s instead of the required W-2 forms; (b) improperlycharged borrowers a broker fee in addition to an approximate one percent origi-nation fee for loans it originated; (c) submitted a false certification to theDepartment in connection with an FHA-insured loan; (d) failed to disclose the bro-ker fees charged to borrowers on the Good Faith Estimates (GFE); (e) charged bor-rowers commitment fees without a written agreement guaranteeing the interestrate and discount points.Action: Permanently withdrawing FHA approval and imposing a civil money penal-ty in the amount of $71,000.

21. Underwrote HECM loans without having the necessary HECM lending license inthe state where the properties were located and failed to notify HUD that thestate’s banking department had issued a Findings of Fact and Temporary Order toCease and Desist Notice against the lender.Action: Issuing a letter of reprimand and imposing a $10,000 civil money penaltywithout admitting fault or liability.

22. (a) Failed to ensure HUD’s minimum credit requirements were satisfied; (b) failedto verify income and employment histories; (c) failed to document the source and/oradequacy of funds for the closing costs and/or debt satisfaction; (d) failed to verifydocuments faxed from an unknown source; (e) failed to ensure that properties metthe conditions specified on the Uniform Residential Appraisal Reports, and were eli-gible for FHA insurance; (f) failed to discontinue misleading advertising concerningthe FHA Mortgage Insurance Premium Refund, despite previous sanctions imposedby the Board for the same violation; (g) charged prohibited, duplicative, and/or non-customary, non-reasonable fees to borrowers; (h) failed to ensure the completenessand accuracy of the data submitted to HUD; (i) failed to develop and implement aquality control plan in accordance with HUD/FHA requirements; (j) failed to notifyHUD/FHA that it did not renew its license to originate home mortgages.Action: Permanently withdrawing FHA approval.


“I have always workedfor the smaller entre-preneurial wholesaler

and competed mightilywith the big guys and itworked out very well.”

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hood that borrower applications areoverlooked or that applicants are inad-vertently denied a modification. For more information, visit www.hud.gov.

Foreclosure rescue firmto return $2.4 million toconsumers to settle FTCcharges

Home Assure LLC, acompany that deceivedconsumers with prom-ises it could save theirhomes from foreclo-

sure, will pay $2.4 million to victims aspart of a settlement with the FederalTrade Commission (FTC). The case is partof the FTC’s continuing crackdown onscams that prey on financially distressedhomeowners. According to the FTC’scomplaint, Home Assure LLC conducteda nationwide marketing campaigndesigned to take advantage of strugglinghomeowners by offering so-called mort-gage foreclosure rescue services. HomeAssure typically charged consumers anupfront fee of $1,500-$2,500. The com-pany’s representatives falsely claimedthat its special relationships withlenders would enable it to get favorableloan modifications or stop foreclosure,and that the company had helped thou-sands of consumers avoid foreclosure.

One of the claims on its Web site was,“If we are unable to negotiate a plan withyour lender that improves your situationor gives you a viable strategy to avoidforeclosure, we will refund 100 percent ofyour money. . . No questions asked!”

According to the FTC, however, HomeAssure did little or nothing to help con-sumers avoid foreclosure. In numerousinstances the company refused to payrefunds, sometimes claiming that con-sumers did not meet the terms of thecontract for a refund or that they hadbreached the contract by contactingtheir lender or filing for bankruptcy, andsometimes without giving a reason.

The settlement order imposes a $2.4million judgment on Home Assure andbans the company from selling mort-gage loan modification and foreclosurerelief services. The order also perma-nently prohibits Home Assure from mis-representing any good or service, dis-closing or benefitting from customers’personal information, and failing to dis-pose of customer information properly.

The FTC vote to authorize staff to filethe stipulated final order was 5-0. Theorder was filed in the U.S. District Courtfor the Middle District of Florida,Tampa Division.For more information, visit www.ftc.gov.

Fremont exits bankruptcyand re-emerges asSignature Group Holdings

Private investmentfirm Signature GroupHoldings LLC has

successfully reorganized Anaheim, Calif.-

based Fremont General Corporation,ending a two-year battle over the fate ofwhat was once one of the nation’s largestsub-prime lenders. Signature’s plan ofreorganization became effective June 11,2010, and as of that date, FremontGeneral changed its name to SignatureGroup Holdings Inc. Signature’s plan waspreviously approved by Fremont’simpaired debt and equity constituentsand confirmed by Judge Erithe Smith ofthe U.S. Bankruptcy Court for the CentralDistrict of California in Santa Ana, Calif.

The successful reorganization ofFremont ends a contested bankruptcycase that began in June 2008 and at onetime attracted as many as six differentplan proponents. Signature’s plan ofreorganization includes a $10.3 millionequity infusion and the issuance of war-rants to purchase additional shares. Inwinning control over Fremont, Signatureprevailed over five competing plans in ahighly complex and competitive reorgan-ization process.

Signature intends to focus on credit-oriented special situation lending andinvestments in middle-market compa-nies on a national basis. One of the keyfeatures of the Signature plan is thepreservation of Fremont’s equity—exist-ing Fremont shareholders will holdapproximately two-thirds of the out-standing shares of the reorganized com-pany. Additionally, Signature’s plan ofreorganization projects that approxi-mately $769 million in net operatingloss carry-forwards will be available tooffset future taxable income.

“We are excited about putting ourplan to work and believe it represents along-term win for Fremont’s investorsand creditors,” said Signature ManagingDirector Craig Noell. “This is a tremen-dous opportunity to turn Fremont into aprofitable business—one that can takea lead role in lending to and acquiringmiddle market companies, a sector thatcontinues to be starved for capital andquality credit.”

Signature Capital Advisers, LLC hasentered into an interim investmentmanagement agreement with the newcompany. Key directors and officersinclude Signature co-Founders CraigNoell and Kyle Ross, along withKenneth Grossman, a veteran turn-around professional and distressedinvestor, and Tom Donatelli, a manag-ing director at Signature.

“This is a true turnaround story, con-sidering the fate of many of the nation’sother major subprime lenders,” saidGrossman, a Signature Capital manag-ing director. “As a special situationsinvestor and commercial lender toquality credits, the Signature platformcombines a healthy capital base,diverse shareholders, and a significantpool of net operating losses to offsetfuture taxable income from our current


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23. Failed to comply with HUD documentation requirements for the assignmentof a defaulted multi-family apartment mortgage.Action: $37,500 civil money penalty without admitting fault or liability.

24. No longer had the requisite warehouse line of credit or other mortgage-fund-ing program acceptable to HUD.Action: Permanently withdrawing FHA approval.

“An ounce of prevention is worth a pound of cure.”—Benjamin Franklin

I hope you have taken the time to go through this list. It is generally repre-sentative of the kinds of violations the MRB will review. If your case comes beforethe MRB, it will likely be evaluated by the following board members or theirdeputies: Assistant Secretary for Housing-Federal Housing Commissioner (whoserves as the chairperson); the President of GNMA; HUD’s General Counsel; theAssistant Secretary for Administration; the Chief Financial Officer and theAssistant Secretary for Fair Housing and Equal Opportunity (who votes only oncases involving Fair Housing and Equal Opportunity issues). HUD’s InspectorGeneral and the Director of HUD’s Office of Lender Activities and ProgramCompliance are non-voting advisors to the Board, but they can be expected toparticipate.

The process starts when HUD sends the lender a Notice of Violation, whichdescribes the particular findings upon which an administrative action is based.The lender will have only 30 days to respond to the Notice of Violation. If thelender does not submit a response, the case moves forward with the Department’srecord. If the lender does respond, the Departmental Enforcement Center (DEC)staff reviews the response and presents the case to the MRB for its consideration.

I would suggest that you make a firm commitment to implement all ofHUD/FHA’s program statutes, regulations and handbook requirements. Be contin-ually prepared for a Quality Assurance Examination and make sure you are fullyexecuting and documenting corrective actions. Consult a competent, mortgagecompliance professional to ensure that your policies, procedures, and regulatorycompliance requirements are accurate, timely, properly enforced, and updated.

If any of the above violations are in any way part of how you conduct business,be prepared eventually to face the MRB. Only you can avert the costly and, insome cases, terminal mistakes made by other FHA lenders.

Submit your questions …Do you have a regulatory compliance issue that you’d like to see addressed in theRegulatory Compliance Outlook Column? If so, e-mail your issue or concern toJonathan Foxx at [email protected].

Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing directorof Lenders Compliance Group, a mortgage risk management firm devoted to provid-ing regulatory compliance advice and counsel to the mortgage industry. He may becontacted at (516) 442-3456 or by e-mail at [email protected].

Footnotes1—HUD Reform Act of 1989 (12 USC § 1708) established the Mortgagee ReviewBoard (MRB), and the Code of Federal Regulations (24 CFR Part 25) outlines itsduties and procedures.

2—Mortgagees may appeal any sanction the MRB imposes, except for a letter ofreprimand.

3—Includes lenders involved in Single Family and Multifamily insurance programs.

4—The MRB also enforces the provisions of the Fair Housing Act, the Equal CreditOpportunity Act, the Home Mortgage Disclosure Act, and Executive Order 11063 asthey apply to the origination or servicing of HUD/FHA-insured single family and mul-tifamily loans.

5—Lenders do not physically appear before the MRB to present their cases. TheDepartmental Enforcement Center (DEC) staff will include the lender’s writtenresponse in the material provided to the MRB.

6—Section 202(c) of the National Housing Act requires HUD to publish in theFederal Register the cause and description of the administrative action taken bythe MRB against HUD approved mortgages.

7—Federal Register/Vol. 75, No. 142/Monday, July 26, 2010/Notices.

regulatory compliance outlook continued from page 22mortgage professional continued from page 22

on whether or not the loan wasapproved. It’s a great retention tool forreferral sources.

What lies ahead for the future of themortgage broker? What do you say tothose who are basically throwing inthe towel and going to work for a netbranch or are consider working for abank? Do you have a message ofhope or optimism for this group?I think that the branching opportunity isnot a bad option for some people. It couldbe ideal for someone looking for multiplestate licenses, and someone looking todeal with the bonding issues that are outthere today. Seeking assistance with thenew education requirements is anothergood reason to join a branch.

That being said, I think there is aplace in this market for the good, high-quality broker who runs their shopwell, writes quality loans, gives qualityeducation to his or her loan officers,and keeps on top of the latest in leg-islative and regulatory changes.

This is, by no means, Armageddon formortgage brokers, but it has certainlycleared out the men from the boys andhas forced quality back in the mortgagemarketplace and has stepped up thestandards of underwriting.

Do you have any closing comments?I think that the relationship that wehave here at REMN between manage-ment, senior managers and executivemanagement, all the way down to oursalespeople, is a transparent relation-ship that can be seen even by the bro-kers This relationship permeates rightdown to the broker shop.

I just walked into the office of oneof my regional managers, and he hasfour files in his arms trying to getthem done. What do we do? He’sthere with the other senior managerstrying to figure out how it’s going toget done, and that’s the type ofhands-on mentality we exhibit hereat REMN. Our success starts at the topand it trickles down. I enjoy a sce-nario where the business cultureincludes working with the very top ofthe management chain, all the waydown to the broker.

Our very best brokers whom wehave long-term relationships with arethose who not only embrace doingbusiness with REMN, but they embraceour culture and our commitment tocustomer service and loan quality.

If you’re on the same page with thebroker as far as what the end resultsare—that’s a good relationship. If youembrace a culture of quality loansfrom quality originators with qualityunderwriters who deliver a qualityfinished product, those are the verybest relationships that exist out thereand that is what we have built REMN’sbusiness on.

“The level of service you get fromREMN is not even remotely closeto that of what you get from the

bigger companies out there.”

We are seeking nominations from our readers for the National MortgageProfessional Magazine’s “40 Under 40” feature, slated to appear in ourNovember 2010 edition.

Who qualifies: Anyone who is under the age of 40 and has had a majorimpact on the industry. This could be through innovation, association par-ticipation, sales force automation, community activism, management tech-niques, technology or any other significant method that has influenced ourindustry. We would need a short, three-line bio on you, along with a colorphoto and company contact info to complete the profile.

To be considered for the 40 Under 40 feature, visitNMPMag.com/submit40under40 to submit your nominations.

National Mortgage Professional Magazine Presents ... The 40 Under 40

The 40 Most Influential Mortgage Professionals Under 40

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income and deep-value investmentstrategy. The ‘old’ Fremont, now knownas Signature Group Holding, Inc., has asecond lease on life.”For more information, visit www.signa-turecap.com.

SEC finds mismanagementof CDOs tied to mortgage-backed securities

The Securities & ExchangeCommission (SEC) hascharged Thomas Priore, aNew York-based invest-ment advisor, and three

of his affiliated firms with fraudulentlymanaging investment products tied tothe mortgage markets as they came underpressure in 2007. The SEC alleges that, atthe direction of its Owner and PresidentPriore, ICP Asset Management LLCdefrauded four multi-billion-dollar collat-eralized debt obligations (CDOs) by engag-ing in fraudulent practices and misrepre-sentations that caused the CDOs to losetens of millions of dollars. Priore and hiscompanies also improperly obtained tensof millions of dollars in advisory fees andundisclosed profits at the expense oftheir clients and investors.

“ICP and Priore repeatedly put them-selves ahead of their clients,” said RobertKhuzami, director of the SEC’s enforce-ment division. “Instead of acting as fidu-ciaries, they took advantage of a dis-tressed market to line their own pockets.”

According to the SEC’s complaint,filed in the U.S. District Court for theSouthern District of New York, ICPbegan serving in 2006 as the collateralmanager for what were known as theTriaxx CDOs, which invested primarilyin mortgage-backed securities (MBS).ICP’s affiliated broker-dealer ICPSecurities LLC and its parent companyInstitutional Credit Partners LLC alsoare charged in the SEC’s complaint.

The SEC alleges that ICP and Prioredirected more than a billion dollars oftrades for the Triaxx CDOs at what theyknew were inflated prices. ICP and Priorerepeatedly caused the Triaxx CDOs tooverpay for securities in order to makemoney for ICP and protect other ICPclients from realizing losses. The pricesfor such trades often exceeded marketprices by substantial margins. In sometrades, ICP caused the CDOs to pay aprice that was substantially higher thanthe price another ICP client paid for thesecurity earlier the same day.

George S. Canellos, director of theSEC’s New York regional office, said,“The CDOs were complex but the lessonis simple: collateral managers bear thesame responsibilities to their clients asevery other investment adviser. Whenthey violate their clients’ trust, we willhold them accountable.”

According to the SEC’s complaint,ICP and Priore caused the CDOs tomake numerous prohibited invest-ments without obtaining necessary

approvals, and they later misrepresent-ed those investments to the trustee of theCDOs and to investors. The prices of manyof these investments were intentionallyinflated to allow ICP to collect millions ofdollars in advisory fees from the CDOs.The SEC further alleges that ICP and Prioreexecuted undisclosed cash transfers froma hedge fund they managed in order toallow another ICP client to meet the mar-gin calls of one of its creditors. Priore sub-sequently misrepresented the transfers tothe hedge fund’s investors.For more information, visit www.sec.gov.

Final guidance issued onincentive compensation

The Federal Reserve, theOffice of the Comptrollerof the Currency (OCC),the Office of ThriftSupervision (OTS), andthe Federal Deposit

Insurance Corporation (FDIC) have issuedfinal guidance to ensure that incentive com-pensation arrangements at financialorganizations take into account riskand are consistent with safe and soundpractices. The guidance was originallyproposed by the Federal Reserve lastyear. The OCC, OTS, and FDIC are join-ing in issuing the final version.

The Federal Reserve, in cooperationwith the other banking agencies, hascompleted a first round of in-depthanalysis of incentive compensation prac-tices at-large, complex banking organiza-tions as part of a so-called horizontalreview, a coordinated examination ofpractices across multiple firms. TheFederal Reserve recently delivered assess-ments to the firms that included analysisof current compensation practices andareas requiring prompt attention. Firmsare submitting plans to the FederalReserve outlining steps and timelines foraddressing outstanding issues to ensurethat incentive compensation plans donot encourage excessive risk-taking.

“Many large banking organizationshave already implemented some changesin their incentive compensation policies,but more work clearly needs to be done,”Federal Reserve Governor Daniel K.Tarullo said. “The Federal Reserve expectsfirms to make material progress this yearon the matters identified as we worktoward the ultimate goal of ensuring thatincentive compensation programs are riskappropriate and are supported by strongcorporate governance.”

During the next stage, the bankingagencies will be conducting additionalcross-firm, horizontal reviews of incen-tive compensation practices at thelarge, complex banking organizationsfor employees in certain business lines,such as mortgage originators. Theagencies will also be following up onspecific areas that were found to bedeficient at many firms.


Reverse mortgages are national securityassets. They are part of the solution toAmerica’s escalating entitlements andmounting national debt. They arenational debt-busters.

A fresh narrative crafted around theabove ideas is needed if we are to buildchampions for Home Equity ConversionMortgages (HECMs) and reverse mort-gages at a time of deep anxieties aboutour national debt.

On June 22, White House BudgetChief Peter Orszag resigned, in part,because of frustration over Congressand the Obama Administration’s inac-tion on our looming national debt crisis.

On June 24, Joint Chiefs of StaffChairman Admiral Mike Mullen calledU.S. national debt the biggest threatto our nation’s security. Our $14 tril-lion national red-ink as the biggestthreat to our national security? Wait aminute: Admiral Mullen is a militaryman, and he’s saying that al-Qaeda,the Taliban, Iran, North Korea, andweapons of mass destruction aresmall potatoes compared to thethreat posed by our bloated nationalbalance sheet.

The Admiral’s words reflect concernabout the military’s ability to maintaincurrent fighting forces and to modern-ize weapons systems if the governmentdoesn’t tighten its belt, including at thePentagon.

Among the world’s developedeconomies, the U.S. is the only nationwithout a coherent deficit-fightingplan. Thanks to the financial crisis andthe massive rescue, the national debthas grown even bigger. It is projected tohit 75 percent of GDP by 2015.

The same day Obama’s budget guyquit, British Chancellor of theExchequer (Treasury Chief), GeorgeOsborne, presented a tough deficit-busting budget in Parliament. AcrossEurope, austerity budgets and anti-aus-terity protests are everywhere, from theweakest to the strongest economies,from Greece to Germany.

We have been lucky so far because ofthe renewed strength of the dollar. The

dollar’s current vitality comes from theEuro crisis which stems from the Greekdebt crisis and rumors of potentialnational debt troubles in Spain,Portugal and other Eurozone countries.

Nervous investors have been run-ning into the dollar, raising the pricesof U.S. Treasury and Treasury-likeassets (HECMs are treasury-likebecause of the federal credit insur-ance behind them), and driving downthe yield on the 10-year U.S. Treasurynote to about three percent duringthe week beginning July 25. Someanalysts believe the yield could fall totwo percent soon.

The Euro-crisis-led flight to the dollaris the reason so much money is chasingHECM-reverse-mortgage-backed securi-ties in the secondary market which, inturn, has led to mouth-watering yield-spread premiums (YSPs) and the currentprice war in the U.S. reverse mortgagemarket.

When the pendulum swings theother way and fears over U.S. nationaldebt cause investors and speculators toattack the dollar and dollar-denomi-nated assets, there will be some painfulre-adjustments in the reverse mortgageindustry. This is the context for my sug-gestion that reverse mortgages shouldbe reframed as national debt-busters.They will help bring massive privateresources to help Congress, the Obamaand successive administrations combatthe national debt.

In his memoirs, The Age ofTurbulence, Alan Greenspan arguedthat private resources must be part ofthe solution to America’s entitlements-

Reverse Mortgages as National Security Assets

“… reverse mortgages should bereframed as national debt-busters.

They will help bring massive privateresources to help Congress, the

Obama and successive administra-tions combat the national debt.”


Photo credit: Adam Gault

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Qualified Candidates with a proven track record will get:• Guaranteed Salary• Full Benefits Package• Bonus based on profitability of branch office.• Assistance with recruiting and training team.

Call Dane Basham today 888-544-0034

Gateway Mortgage Group is seeking more leaders to run a retail branch office.

“If I was in the market to become a branch manager or work as a loan officer, Dane would be on the shortlist of friends I would contact. His positive attitude is infectious. You cannot have a conversation with Daneand NOT be motivated.” November 28, 2006

Andrew Berman, Executive Vice President, The Mortgage Presswas a consultant or contractor to Dane at Gateway Mortgage Group LLC

now has the right system in place formaximizing efficiency and quality.”For more information, visit www.inlan-ta.com or www.mortgageaccounting.com.

MyCapitalAccesslaunched to provide rev-enue opportunities formortgage professionals

MyCapitalAccess, a provider of financeproducts and operational services tosmall businesses nationwide, hasannounced the launch of the companyand the MyCapitalAccess.com platformthat connects small businesses withaccess to capital and the knowledgeand resources to more successfullyoperate and grow their businesses.

MyCapitalAccess was founded bymortgage industry veterans AnthonyChao, chief operating officer of AlliedMortgage; Leo Padron, founder and for-mer chief executive officer of MetWestand previously the top commercial orig-inator in the country; and Art “Ski”Swiatkowski, former vice president ofbusiness development for InterbayFunding and trainer for the NationalAssociation of Mortgage Bankers (NAMB)in the area of commercial lending. Thecompany was developed with the goalof making capital and businessresources accessible to small companiesas they weather the current economicdownturn and begin to grow again.

“It is no secret that there are a sig-nificant number of small companiesstruggling to survive because they donot have access to the money theyneed to operate or grow their business-es,” said Swiatkowski. “In acting as anadvocate for these companies,MyCapitalAccess assists borrowers inidentifying all possible options to satis-fy those needs.”

Through the program, borrowersbecome members of MyCapitalAccessand are guided through the applicationprocess. A MyCapitalAccess staff mem-ber then determines the best solutionfor the member’s situation.

“The MyCapitalAccess small businessprogram has proven very valuable to meas I have built my company,” said WalterOrmazabal, president of Pilar Services.“With the company’s assistance in get-ting a $500,000 line of credit, my airconditioning business has expandedstatewide with 45 employees andenabled me to take on larger projects.”

MyCapitalAccess looks to expand itsoutreach to small businesses through anetwork of affiliates driven by mortgage,real estate and financial services profes-sionals. By becoming an affiliate, theseprofessionals are able to increase incomeby facilitating relationships with smallcompanies and selling MyCapitalAccessmemberships and services.

“My co-founders and I have allwatched mortgage brokers and otherprofessionals suffer through extremelydifficult conditions over the past twoyears,” said Swiatkowski. “With ourmortgage backgrounds, it was impor-

tant to us to help those individuals findalternate sources of revenue.”

To further assist small businessesand provide opportunities for affiliates,MyCapitalAccess is launching a suite ofbusiness knowledge services and prod-ucts aimed at helping the company’smembers successfully operate andgrow their businesses.For more information, visit www.mycap-italaccess.com.

PCLender.com announcesintegration with creditreporting agency Avantus

PCLender.com Inc. has announced anextended markup language (XML)data integration between its flagshiploan origination system (LOS) InHouseMortgage and credit reporting com-pany Avantus LLC. The companiespreviously shared a standard two-wayinterface for ordering credit withinIHM and populating screens with thereturning liabilities, but upgraded toa MISMO-compliant integration fortwo reasons.

“Fannie Mae and Freddie Mac willsoon require that all transmission ofsensitive borrower data on loans theypurchase meet certain guidelines,”said Cy Brinn, chief operating officer ofPCLender.com. “Our integration withAvantus adheres to those standards.”

PCLender.com is focused on new waysto use XML to increase automation in theproduction of mortgage loans throughimproved integration with other Web-based service providers. The integrationwith Avantus allows PCLender.com toextract much more data than is returnedwith a standard Fannie Mae 3.2-format-ted interface, and the individual dataelements can be used to drive businessrules, data checks, and hard-stops thatprevent a problem loan from movingforward.

Avantus specializes in providing cus-tomized mortgage credit reports, taxreturn verification, fraud identificationtools, flood certification, automatedvaluation models (AVMs) and a host ofother mortgage-related services andtechnology to the nation’s financialcommunity.

“Our integration with PCLender.comwill allow lenders to immediatelyincrease their overall transactional effi-ciencies and improve the quality oftheir loan portfolios,” said Kevin Rost ofAvantus LLC. “Lenders will be able tocapture and incorporate critical creditand mortgage information into the ear-liest stages of the loan originationprocess. Given the importance of havingthe right information available at theright time, this integration will signifi-cantly improve lenders’ ability to pro-vide exceptional service to their borrow-ers and deliver a high quality loan into thesecondary market.”For more information, visit www.pclen-der.com or www.avantus.com.

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Inlanta boosts efficiencywith new AMB account-ing system

Inlanta Mortgage hascompleted imple-mentation of a newaccounting system

that allows the company’s branch officesto more efficiently manage theiraccounting practices. Inlanta selectedthe Accounting for Mortgage Bankers(AMB) system, a product of AdvantageSystems Inc. of Irvine, Calif., that wasdesigned specifically for the mort-gage banking industry. Loan-leveldetail is built into the AMB systemallowing the accounting departmentto work within one system ratherthan a sea of spread sheets. The sys-tem’s real-time processing featurealso allows Inlanta and its branchmanagers to instantly access Web

reports on profitability by loan, loanofficer and loan type, as well as fortheir branch.

“The new system is a real benefit toour branches because it has eliminatedthe need for time-consuming postingroutines,” said Jean Badciong, chiefoperating officer at Inlanta Mortgage.“Branches can easily log in and remote-ly access their profit-and-loss data, andeven calculate commissions. AMB alsooffers features that are industry-specif-ic, like being able to link money paidby the borrower to money paid out. Allthis functionality will enable Inlanta’spartner offices to continue to grow ourbusiness efficiently.”

“To excel in today’s market, mort-gage banking companies need theloan-level detail that AMB delivers,”said Brian Lynch, who foundedAdvantage Systems in 1986. “Inlanta


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In addition to the work with the large,complex banking organizations, the agen-cies are also working to incorporate over-sight of incentive compensation arrange-ments into the regular examinationprocess for smaller firms. These reviewsare being tailored to take account of thesize, complexity, and other characteristicsof these banking organizations.

The guidance is designed to ensurethat incentive compensation arrange-ments at banking organizations appro-priately tie rewards to longer-term per-formance and do not undermine thesafety and soundness of the firm or cre-ate undue risks to the financial system.Because improperly structured compen-sation arrangements for both executiveand non-executive employees may posesafety and soundness risks, the guidanceapplies not only to top-level managers,but also to other employees who havethe ability to materially affect the riskprofile of an organization, either indi-vidually or as part of a group.

Federal Reserve staff will prepare areport, in consultation with the otherfederal banking agencies, after the con-clusion of 2010 on trends and develop-ments in compensation practices atbanking organizations.For more information, visit www.feder-alreserve.gov.

OCC and OTS releaseMortgage Metrics Report

Performance on homemortgages serviced bythe largest nationalbanks and federally

regulated thrifts improved earlier thisyear for the first time in more than twoyears, according to a report released bythe Office of the Comptroller of theCurrency (OCC) and the Office of ThriftSupervision (OTS).

According to the OCC and OTSMortgage Metrics Report for the FirstQuarter 2010, delinquency rates droppedin the quarter, with improvement in allcategories of mortgages—prime, Alt-A,and sub-prime. The percentage of mort-gages that were current and performingincreased for the first time since the agen-cies began publishing this report in June2008. Mortgages in all stages of pre-fore-closure delinquency improved during thefirst quarter, with the percentage of mort-gages that were 30-to-59 days delinquent,60-to-89 days delinquent, and 90 or moredays delinquent all declining.

However, the number of foreclosuresincreased substantially, including newforeclosures, foreclosures in process andcompleted foreclosures. Compared withthe previous quarter, newly initiated fore-closures increased nearly 19 percent toalmost 370,536; foreclosures in processincreased nearly nine percent to1,170,874; and completed foreclosuresincreased nearly 19 percent to 153,654.Prior reports also cited the increase inforeclosures, as servicers began to exhaust

options to assist holders of seriously delin-quent mortgages and existing foreclosuresin process worked through the system.

At the same time, the number of mod-ifications and other home retentionactions also increased. Overall, the num-ber of actions to prevent avoidable fore-closures increased more than five percentfrom the previous quarter and more than61 percent from a year earlier. Servicersimplemented nearly 630,000 new homeretention actions in the first quarter,including nearly 100,000 modificationsand 190,000 trial period plans made underthe Home Affordable ModificationProgram (HAMP), and 130,000 modifica-tions and 93,000 trial plans under otherprograms. The sustainability of modifica-tions continued to improve, with morethan 87 percent of loan modificationsreducing payments, and nearly 55 percentreducing payments by 20 percent or more.

According to the report, re-defaultrates for modified mortgages remainedhigh, with more than half of all modifiedmortgages 60 or more days past due at12 months following modification.

However, recent modifications per-formed better. New analysis included inthe report showed that, of the 590,000modifications done in 2009, nearly 52percent were current at the end of the firstquarter of 2010. Only 27 percent of themodifications implemented during 2008were current. While delinquency ratespredictably increase over time, data sug-gest more recent vintages of modificationsmay perform better over time. As shownin previous reports, modifications thatreduce the borrower’s monthly principaland interest payments consistently per-form better than modifications that didnot change payments or increased them.

Early data showed that HAMP modifi-cations were also performing better thanmodifications overall, probably becauseof the emphasis on lower paymentsbased on affordability and requirementsfor documented and verified financialinformation from borrowers. At threemonths after modification, 7.7 percentof HAMP modifications were 60 or moredays delinquent, compared with 11.3percent of all modifications.For more information, visit www.occ.govand www.ots.gov.

Your turnNational Mortgage Professional Magazineinvites you to submit any information onregulatory changes, legislative updates,human interest stories or any othernewsworthy items pertaining to themortgage industry to the attention of:

NMP News Flash columnPhone #: (516) 409-5555

E-mail:[email protected]

Note: Submissions sent via e-mail are pre-ferred. The deadline for submissions is the1st of the month prior to the target issue.

influenced fiscal problems. Home equi-ty is private resource.

The size of U.S. home equity wealthmakes it a strategic financial asset.Assuming zero home price apprecia-tion, “free and clear” home equity con-trolled by older Americans aged 62 andolder could reach $9 trillion by 2030,according to a June 2007 study by TheHollister Group. At a modest homeappreciation of 2.3 percent, free homeequity could climb to $19 trillion. Andat 4.7 percent, the wealth could be astaggering $37 trillion, the study said.

In spite of the recent housing bust,which lowered long-term house pricegrowth expectations, the ObamaAdministration’s new housing score-card (www.hud.gov/scorecard) citesFederal Reserve Board data showingthat total home equity has alreadybegun to grow again.

That is why reframing reverse mort-gages as the key to unlocking this mas-sive private wealth to cushion tightpublic entitlements dollars and helpcut our national debt should be theessence of any reverse mortgageindustry communication strategy withpolicymakers, regulators and themedia.

The 20-year-old ad hoc narrative—reverse mortgages saved grandma

from certain financial ruin—is per-suasive at the micro-marketing level.But at the macro-marketing level, it isnow insufficient to persuade policy-makers genuinely anxious about ourescalating entitlements and runawaynational debt.

If Admiral Mullen’s assessment (U.S.national debt is the biggest nationalsecurity threat) is correct, then reversemortgages, as the keys to prudentlyunlocking multi-trillion-dollar privatehome-equity vaults, are national securi-ty assets.

Atare E. Agbamu, CRMS is author ofThink Reverse! and more than 130 arti-cles on reverse mortgages. Since 2002, hewrites the nationally distributed col-umn, Forward on Reverse. Through hisadvisory, ThinkReverse LLC, Agbamuadvises financial professionals, institu-tions, and regulators across the country. Ina 2007 national report on reverse mort-gages, AARP cited Agbamu’s work. He canbe reached by phone at (612) 203-9434and e-mail at [email protected].

Visit author Atare E.Agbamu’s blog at thinkre-verse.com for his thoughts

and insights on the reversemortgage marketplace.

forward on reverse continued from page 25

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• In-House Mortgage Loan Officers (MLOs)

• Team Leaders/Sales Managers

United Northern Mortgage Bankers, Ltd. Corporate NMLS ID# 7230 New York State Banking Dept. - Licensed Mortgage Banker – License #100724 New Jer-sey Dept. of Banking and Insurance – Mortgage Lender – License #L0046623 Pennsylvania Dept. of Banking – Mortgage Lender – License #20887 Connecti-cut Dept. of Banking - Mortgage Lender - License #20372 Massachusetts Div. of Banks and Loan Agencies - Mortgage Lender & Mortgage Broker – License#MC5070 North Carolina Commissioner of Banks – Mortgage Lender – License #L140365 South Carolina State Board of Financial Institutions – Supervised Lender– License #S7,461 Florida Dept. of Financial Institutions - Mortgage Lender - License #ML0700679 Senior Security Home Advantage is a lending area of UnitedNorthern Mortgage Bankers, Ltd. Direct FHA Endorsed Lender

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By Jonathan Foxx

“I never blame myself when I’m not hitting. I just blame thebat and if it keeps up, I change bats. After all, if I know it isn’tmy fault that I’m not hitting, how can I get mad at myself?”—Yogi Berra

Let’s admit it: The tendency to pretend we’re holding some-body or some entity “accountable” for the mortgage crisis,when we’re really not, is just a fashionable avoidance of thatunpleasant word “blame.” Once that label sticks, it’s on to

dealing with the nasty culprits! Blaming is purported to be cowardly, even passive;and being held accountable is lauded as proactive and high-minded. So, the word“accountable” is now in vogue, instead of “blame.” Frankly, the word “accountable”in today’s world is merely politically-correct, euphemistic Newspeak for the fact that“you know you did wrong, I know you did wrong, everybody in the world knows youdid wrong, but you’ll pay no penalties whatsoever for doing anything wrong.”

Although the tone-at-the-top mantra of the Obama Administration is, “Let’slook forward and not look back,” or the Bush Administration’s tactic of retroac-tively making lawful what was heretofore unlawful (or unconstitutional) remainsbeyond contest, or the ongoing trading of opaque financial instruments seems tocontinue in an entirely unregulated market, or many government departmentsand agencies are still remaining reactive at best during a crisis—in the Newspeakof our times, we are assured of accountability, which now apparently meansthere’s nobody to blame at all, nobody held responsible for the meltdown, nobodyto put in jail. Everybody’s free to go and, we’re admonished, it doesn’t do any goodto blame anybody for anything, since we can’t fix this mortgage mess unless anduntil we all can get along, be bi-partisan, be post-partisan, and look to the betterangels of our nature!

Accountability these days seems to mean no adverse consequences to the per-petrator and no blame for anybody. If you find a person to blame, that person’snot accountable; and if you find somebody who is accountable, that person is notto blame. While lobbyists, dogmatists, political catechists, and ideologues justmake stuff up, they’ve found the culprit for sure, those bad actors portrayed asdirectly and indirectly culpable, the rapacious mortgage originators: they certain-ly should be blamed, reined in, re-regulated, and de-incentivized for having large-ly contributed to the worst financial crisis since the Great Depression!

Portraying mortgage originators as the culprit is a politically useful narrativemeant for the consumption of low information voters; but, as we’ll see, there isplenty of blame in this game and, to date, not much real, old-fashioned account-ability—the kind that has real world consequences—except, of course, for thosewho originated the mortgages in the first place.

“Results are what you expect, consequences are what you get.”—AnonymousOn Tuesday, June 22, 2010, a Conference Committee met in Room 106 of theDirksen Senate Office Building, in Washington, D.C. to reconcile Senate andHouse versions of HR 4173, known as the Wall Street Reform and ConsumerProtection Act. That bill ostensibly was drafted to create a new consumer finan-cial protection “watchdog,” bring about an end to “too big to fail” bailouts, set upan early warning system to “predict and prevent” the next crisis, and bring trans-parency and accountability to exotic instruments such as derivatives. Led by Rep.Barney Frank (D-MA) and Sen. Christopher Dodd (D-CT), the conferees reviewedand voted on new regulations, as well as additions, deletions, and revisions ofexisting regulations.

The list of new regulations and amendments to existing regulations, consistingof thousands of pages, read like the attenuated, convoluted, cross-tabulated IndexSection of a Whodunit’s Guide to the Perplexed. Seated around a large, rectangu-lar dais, the Committee’s politicians called one another out, speechified, posturedand legislated to protect their respective constituencies, absolved themselves ofever having allowed their own politics to contribute to the financial crisis, whilethe Clerk recorded votes, staff members raced around, and lawyers scurried aboutwith various and sundry red-lined versions of financial reform legislation.

On Friday, June 25, 2010, all the backroom, sub rosa, deals were ironed out, allthe special interests had their way or lost their sway, and the votes tallied upmostly across party lines: Democrats-Aye, Republicans-Nay. The Ayes had it!Congratulations filled the conference chamber, Representatives and Senatorspraised one another, staff high-fived and hugged one another, and PresidentObama hailed the legislation as the “toughest financial reforms since the ones wepassed in the aftermath of the Great Depression.”1 Now, only House and Senateapproval was needed,2 and thence the President’s multi-pen signature, to becomethe law—which it did on July 21, 2010, just before noon. The legislation, nowknown as the Dodd-Frank Act, became the law of the land.

Among the many features of the legislation, the following was gaveled in:

� Requiring lenders to ensure a borrower’s ability to repay: Establishing a “sim-ple federal standard” (sic) for all home loans to ensure that borrowers can repaythe loans they are sold.

� Prohibiting unfair lending practices: Prohibiting the financial incentives forsub-prime loans that “encourage lenders to steer borrowers into more costlyloans,” including the bonuses known as yield spread premiums (YSPs) that“lenders pay to brokers to inflate the cost of loans.”

� Penalizing irresponsible lending: Issuing monetary penalties to lenders andmortgage brokers who don’t comply with new standards by holding themaccountable for as high as three-year’s interest payments and damages plusattorney’s fees (if any), and, protects borrowers against foreclosure for viola-tions of the new standards.

� Expanding consumer protections for high-cost mortgages: Expanding the pro-tections available under federal rules on high-cost loans—lowering the interestrate and the points and fee triggers that define high-cost loans.

� Mandating additional mortgage disclosures: Requiring lenders to disclosethe maximum a consumer could pay on a variable rate mortgage, with a warn-ing that payments will vary based on interest rate changes.

� Establishing an Office of Housing Counseling: Establishing a special officewithin the U.S. Department of Housing & Urban Development (HUD) to “boosthomeownership and rental housing” counseling. And, most significantly, the leg-islation’s centerpiece: The creation of a new agency, tucked into the U.S.Treasury and clearly under its purview: The Bureau of Consumer FinancialProtection (Bureau). The creation of a regulatory and supervisory authority toexamine and enforce consumer protection regulations with respect to all mort-gage-related businesses, large non-bank financial companies, and banks andcredit unions with greater than $10 billion in assets.

Some of these policies have been worthy of consideration, although othersseem to be the result of reactive, political triage and short-sighted (if not also

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short-term) fixes, without having given much thought to consequences, unintend-ed or otherwise, on the consumer and the mortgage industry.

The Spinmeisters have already begun their “Ode to Financial Reform!” In thisarticle, the first in a series on this “landmark” legislation, we will un-spin andunpack the new law and seek to learn more about exactly what the Dodd-FrankAct (Act) has wrought for the mortgage industry.

Housing bubble? What housing bubble?

“Homes that are occupied may see an ebb and flow in the price at a certain per-centage level, but you’re not going to see the collapse that you see when people talkabout a bubble.”—Barney Frank (D-MA), June 27, 20053

The Act spans to 2,319 pages and affects almost every aspect of the financial serv-ices industry in the United States. Just the sheer size of the Act is indicative of thecomplexity and detailed, interlocking, regulatory authorities and mandatesinvolved.4 Compare this with the 31 pages of the Federal Reserve Act whichbecame law almost one hundred years ago. The law’s size also should be taken toreflect the enormous increase in regulations in the intervening years that must befactored into or subsumed under the Act. Consider the following chart:5

Major financial legislation: Number of pages

Perhaps it would ultimately be worth all the effort put into such a prodigious andvoluminous legislation if its purported objective—prevention of another finan-cial crisis—could be expected to result from enforcement of this law.Unfortunately, it won’t!

The Act does very little to prevent the next financial crisis because, amongother things, it side-steps the “too big to fail” issues, for instance, by not impos-ing size limits on any financial institution; offers virtually no resolution to thedysfunctional operations of the GSEs, Freddie Mac and Fannie Mae; and, fails toreinstate the Glass-Steagall Act’s wall of separation between “utility” and “casi-no” banking. Although it will not prevent the next financial tsunami or BlackSwan,6 implementation of the regulatory requirements of the Act will dramati-cally and permanently affect the way residential mortgages are originated inthis country.

And if ineptitude, complacency, and failure to implement existing regulationswere hallmarks of the regulatory environment prior to the Act, how will we knowin advance how things are going with all these new regulatory requirements? Afterall, thanks to an unnoticed provision in the Act, the Securities & ExchangeCommission (SEC) is now declaring itself exempt from Freedom of Information Act(FOIA) requests, one of the bulwarks of government transparency. Perhaps othergovernment entities involved in the Act’s implementation will stake out similarpositions.7 Of course, there are periodic reports to Congress on many issues andprograms; however, Congress is the domicile of politicians and they often findways to underplay failures and exaggerate successes.

Residential mortgage loan provisions: New rulesAnalyzing this vast financial and mortgage reform legislation is a dauntingprospect. Over this series of articles, we will highlight many of the Act’s compo-nents. The articles in this series on the Dodd-Frank Act are meant to provide anoverview. However, this legislation is extremely detailed and extensive. Therefore,for guidance and risk management support, I recommend that you consult a res-idential mortgage compliance professional in developing policies and proceduresto implement the Act’s requirements.

Essentially, the following matrix provides a generalized outline of the salientprovisions of the Act that directly affect residential mortgage loans originations.

Dodd-Frank Wall Street Reform and Consumer Protection Act Residential Mortgage Loan Originations

Formation/Powers: Bureau ofConsumer Financial Protection

Supervision of Non-DepositoryInstitutions

Mortgage Loan RegulatoryProvisions

Improving Access to MainstreamFinancial Institutions

Pre-Dispute Arbitration andSpecific Bureau Authorities

Mortgage Reform and PredatoryLending Act

Enforcement Powers of theBureau

� Bank Supervision� Preemption and Visitorial Powers� Interchange Fees� Credit Scores� Transfers (Remittances)� Enforcement and Remedies

� Rules� Recording� Examinations� Enforcement and Remedies� Enforcement in concert with FTC

� Residential Mortgage Loan Origination� Minimum Mortgage Standards� High-Cost Mortgages� Office of Housing Counseling� Mortgage Servicing� Appraisal Requirements� Mortgage Resolution and Modification� Other Provisions

� Access to Financial Institutions� Low-Cost Alternatives to Small Dollar

Value Loans� Establishing Loan-Loss Reserve Funds

� Pre-Dispute Arbitration� Bureau Authorities

� Ability to Repay� Defense to Foreclosure� Prepayment Penalties� Single Payment Credit Insurance� Arbitration Agreements� Negative Amortization Loans� Anti-Deficiency Protections� Partial Payments� Increase to Civil Liability Provisions� Lender Rights for Borrower Deception� Hybrid Adjustable Rate Mortgages� Required Disclosures at Consummation� Required Monthly Statements� Government Accounting Office Report

� Investigations/Administrative Discovery� Hearings and Adjudication Proceedings� Litigation Authority� Relief Available� Other Enforcement Issues


For the remainder of this article, we will be reviewing the Mortgage LoanRegulatory Provisions and, where relevant, its integration into other parts of theDodd-Frank Act.

Mortgage loan regulatory provisionsResidential Mortgage Loan OriginationThe Act revises the Truth-in-Lending Act (TILA) by placing restrictions on “mortgageoriginators.” These new requirements are promulgated in addition to those imposedby the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act).8

The SAFE Act includes both registered and licensed mortgage loan originators (MLO).9

Specifically, the Act prohibits an MLO from receiving compensation, such as a yieldspread premium (YSP)10, based on the terms of the mortgage loan and it also effec-tively prevents the MLO from receiving compensation from other sources if suchcompensation is being otherwise received, directly or indirectly, from the consumer.

TILA, as now revised by the Act, will provide that an MLO may not receive fromany person (and no person may pay to an MLO), directly or indirectly, any com-pensation that varies based on the terms of the loan, other than the principalloan amount. With respect to the latter, compensation is allowed to the MLO (1)based on the principal amount of the loan, and (2) to be financed through theloan’s rate as long as it is not based on loan’s rate and terms and the MLO does

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This coming November (2010), I willcomplete my 51st year as a mortgagebanker, and as the old saying goes,“Nobody knows the trouble I’ve seen.”

The last 10 years make the previous41 pale in comparison. That statementseems hard to believe, as I rememberbusiness slowdowns/recessions of thepast five decades:

� The Ohio usury law flare-up that putmortgage bankers out of businessfor weeks;

� The absolute and total absence ofmortgage money in the mid 1970s(solved by the geniusof Lewis Ranieri andhis idea of mortgage-backed securities);

� De-regulation of thebanks;

� The early 1980s whenwe made mortgageloans at 20 percentinterest and more, andhoped and prayed thatsome day, rates woulddrop back to a morereasonable 12 percent;

� The savings and loandebacle; and

� Much more!

The examples aboveare just a few of the“opportunities” we faced,and you know what, weovercame each and everyone of these crises.

Up until the mid- tolate-1980s, we enjoyed atleast a semblance of com-petency in business andpolitical leadership. Theerosion in quality of lead-ership, integrity and honesty seemed tocreep in virtually unnoticed over thelast decade or so. The recessions wefaced were met with straightforwardcommon sense, guided by “the law ofthe jungle.” There were no massivegovernment bailouts full of graft andpork, no coddling of incompetent man-agement, no changing of laws and reg-ulations to justify shady dealings, andcorporate CEOs who failed or werecaught with their hands in the cookiejar were dismissed and they didn’tleave with million dollar bonuses fortheir inept failures!

I have always made it a point to be acheerleader or a thorn in the side ofour political leaders, depending on theirneeds. Looking back to the early 1970sand forward, and reviewing letters I havereceived from congressmen, governorsand even a United States president showa clear picture of negative change. Myfiles include personal responses fromsome who actually show they read myletters, from Sen. Joe Lieberman (whoafter a long and thoughtful response tomy concern, reminded me, “I am notyour Congressman”), Sens./Reps. SherrodBrown (several letters), Ralph Regula,

John Glenn, Jesse Helms (avery intelligent two-pageletter), Rod Gram, GeorgeVoinovich and Ohio Gov.James Rhodes.

The last few years, theresponses are basically boil-er plate and most showthey didn’t read or under-stand my concern … never-theless, I continue the bom-bardment of letters to elect-ed officials. Several of thesemen have verified thatheavy incoming citizen con-cern on a particular subjectdoes get their attention.The insanity of “sub-primelending” is now beingmatched by new lendingregulations/requirements,many of which are inconsis-tent, detrimental to bor-rowers, and create dracon-ian penalties to lenders forerrors that are easily madedue to misunderstandingfoggy and confusing rules.Wonder what would hap-pen if we simply re-

imposed common sense underwriting thatserved us well for most of the 20thCentury?

At the time of application, the bor-rower is given a list of closing costs thataccurately show what cash they willneed at closing, the note interest rate isclearly stated (not an annual percent-age rate that no one understands). Aborrower must have a credit report thatshows a history depicting both the abil-ity and willingness to pay their obliga-tions (the credit report is actuallyunderwritten by an underwriter, and isnot credit score-driven) actually obtain-

“The insanity of ‘sub-prime lending’ isnow being matched by

new lending regula-tions/requirements,many of which areinconsistent, detri-

mental to borrowers,and create draconianpenalties to lenders forerrors that are easilymade due to misun-

derstanding foggy andconfusing rules.”

ing a written verification of stableemployment and showing income suffi-cient to service their mortgage anddebt. The total mortgage paymentwould come to no more than 28-30 per-cent of their monthly householdincome, and total mortgage paymentand total monthly debt paymentswould come to no more than 36-38 per-cent of their monthly income. In addi-tion, they must verify actual cash in thebank available for downpayment. Thecry would be loud and clear: “If you didthis … no one could qualify for a mort-gage!” Wrong … the borrower wouldnow qualify for a mortgage they couldhandle! Instead of starting with a$250,000 home, they would have tobuy a $180,000 home. That’s the way itworked when sanity prevailed.

Up to the mid- to late-1980s, ourcompany had a mortgage servicingportfolio of about $125 million dollarsand our delinquency ratio on any pay-ments 30 days or more past due wasalways less than three percent. Today,the industry standard is 10 percent ormore on delinquencies! The politicians

and regulators are on a crusade … theyare unapologetically on a mission toeliminate all but the banks and hugelenders from the business of mortgagelending. While the Mortgage BankersAssociation (MBA) and NationalAssociation of Mortgage Brokers (NAMB)are fighting to preserve the industry aswe know it, the changes alreadyimposed have driven hundreds of smallmortgage bankers and mortgage bro-kers out of business or into the arms ofthe banks. I know it seems like expecto-rating into the wind, but we must speakour minds, let the politicians and spe-cial interest groups know the huge mis-takes that are now being made in ourindustry. E-mail every person you knowwho holds even a semblance of influ-ence in our industry and clearly andhonestly state your case! Those cardsand letters must increase!

Canton, Ohio’s own Bill James, CMC is amortgage banker, freelance journalistand 12-year monthly columnist for TheOhio Mortgage Press. He may be reachedby e-mail at [email protected].

heard on the street continued from page 26

Total Mortgage Serviceslaunches wholesale plat-form and expands reversemortgage operations

Total Mortgage Services LLC hasannounced that it has formally launchedits wholesale residential mortgage lend-ing platform, TMS Funding, in 17 statesacross the United States. TMS Funding,which will compliment Total Mortgage’ssuccessful retail lending platform, willoffer mortgage brokers greater choice,service, efficiency and some of the lowestmortgage rates available.

“There is a significant opportunity andneed in the wholesale channel today forquality lenders,” said John Walsh, presidentof Total Mortgage. “Many lenders haveexited the wholesale business and theremaining participants seem to have losttouch with the needs of the broker com-munity. Through our centralized model,TMS Funding will enhance efficiencies andprovide best-in-class service at very com-petitive rates. Our goal is to become animportant resource for the mortgage bro-ker community to help them quickly meetthe needs of their clients.”

Jim Lynch, executive vice presidentof wholesale lending, is heading up themanagement of TMS Funding. Lynchwill be responsible for attracting andbuilding sustainable relationships withhigh-quality mortgage brokers in orderto increase production volumes andbuild market share. Lynch has morethan 20 years of wholesale lendingexperience and has overseen wholesalelending channels on the east coast for

American Mortgage Network (AmNet),Wachovia, and SCME Mortgage Bankers.

TMS Funding will operate through acentralized model from its headquar-ters in Milford, Conn. and will initiallybe doing business in 17 states, withplans underway to be able to originatein at least 35 states by the end of 2010.The current 17 states TMS Funding islending in are: California, Connecticut,Delaware, Florida, Georgia, Illinois,Massachusetts, Maryland, Michigan,New Jersey, New Hampshire, NorthCarolina, Pennsylvania, South Carolina,Tennessee, Texas and Virginia.

Total Mortgage Services LLC has alsoannounced that it is expanding itsreverse mortgage lending operation, theTotal Mortgage Reverse MortgageProgram, to help more senior home-owners in need of accessing the equityavailable in their homes during thischallenging economic environment. Inconjunction with this expansion, TotalMortgage has hired Donna Marino asreverse mortgage specialist to lead thededicated reverse mortgage productbusiness.

Overseeing the reverse mortgage pro-gram at Total Mortgage is Donna Marino,a licensed mortgage professional withmore than 14 years of experience in theresidential mortgage industry, and overfour years of directly handling reversemortgages. Prior to joining Total Mortgagein May 2010, Marino has held direct-toconsumer mortgage lending positions atCampbell Mortgage, Mortgage Solutionsand CT Mortgage during her well-estab-lished career.


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not receive any other compensation such as discount points, or originationpoints, or fees other than third-party charges, from the consumer (or anyone else).

Thus, mortgage brokers cannot receive some portion of compensation fromthe borrower in the form of points and another portion of compensation from thelender in the form of YSP. If the mortgage broker receives YSP from the lender, nopoints may be charged to the borrower. The Act permits “incentive payments” tothe MLO based on the number of loans originated within a specified period oftime: the amount of any commission will be limited to a commission based onloan size with bonuses on the volume of loans that are originated.11 Harkeningback to the time when the MLO received a higher YSP in exchange for lowerupfront costs with a higher interest rate, this new anti-steering rule is designed topreclude YSPs where the MLO is likely to steer a borrower to a particular loanbecause the MLO would receive additional compensation based upon the bor-rower’s rate of interest.

The Federal Reserve Board (FRB) will be issuing new rules to limit “steering” byMLOs. That is, MLOs will not be permitted to “steer” a consumer toward a residen-tial mortgage loan that (1) the consumer lacks, or can be expected to lack, the rea-sonable ability to repay; (2) has any predatory characteristics;12 and (3) promotesdisparities among consumers of equal creditworthiness, but different race, ethnic-ity, gender or age. Steering is broadened to mean directing a consumer to a non-qualified mortgage if that consumer is qualified to receive a qualified mortgage.13

Furthermore, the FRB will issue rules that prohibit MLOs from misrepresenting theresidential mortgage loans available to the consumer, the creditworthiness of theconsumer, and the subject property’s appraised value. Unfair or deceptive acts orpractices (UDAP) rules will be further strengthened through authority given to theFRB to enforce rules prohibiting abusive or predatory practices. Importantly, MLOswill be subject to the liability standards in TILA for violations: up to treble damages—three times the compensation received by the MLO for a residential mortgage loan.

Minimum Mortgage StandardsNew standards will be promulgated through the FRB which will require lenders tomake a “reasonable and good faith determination, based on verified and docu-mented information” that consumers have a “reasonable ability to repay” theirmortgage loans.

In the next article in this series we will discuss the relevant criteria in extensivedetail. However, in general, lenders will need to consider the consumer’s (1) cred-it history, (2) current income, (3) expected future income, (4) current obligations(5) debt-to-income ratio or residual income (after paying all mortgage and non-mortgage debt), (6) employment status, and (7) “any other financial resources”other than equity in the property.

Documenting all these requirements will be mandated; therefore, the lenderwill underwrite loans by obtaining verification of any income or assets normallyused in repayment determination (i.e., tax returns, payroll receipts, bank records,and other third-party documents), butalso either an IRS transcript of taxreturns (i.e., 4506-T) or some otherthird-party income documentationmethod acceptable to the FRB.

High-Cost MortgagesTILA has now been revised by furtherdefining and elaborating the features and requirements of “high-cost mortgages,”which are those mortgages with annual percentage rates (APRs) or points and feesexceeding thresholds stated in the Act.

With respect to high-cost mortgages, lenders are (1) prohibited from encourag-ing default on prior debt to be refinanced in whole or in part by a high-cost mort-gage, (2) limited in imposing late payment fees on delinquent payments, (3) notallowed to include balloon payments, and (4) prohibited from charging a fee tomodify, renew, extend or amend the loan.

Under a due-on-sale provision, or for a material violation of the loan terms, or inthe event of a default, accelerating the principal balance due is permissible. To orig-inate a high-cost mortgage, the lender must receive certification from a HUD-approved counselor that the consumer has received counseling about the advisabil-ity of entering into the loan and the consumer must receive Real Estate SettlementProcedures Act (RESPA) disclosures prior to speaking with the counselor. Additionally,there are restrictions on financing prepayment penalties, points or fees.

Office of Housing CounselingA new office and supporting bureaucracy will be created called the Office ofHousing Counseling (OHC). The OHC will act in an oversight capacity to administerthe counseling on homeownership, renter’s counseling and certain educational


landmark financial legislation continued from page 29

“Accountability these days seemsto mean no adverse consequencesto the perpetrator and no blame

for anybody.”

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A View From the C-SuiteUnraveling the complexities of compliance

in the age of technology

So, if you think it’s been a challenge tomanage compliance in the past, braceyourself … it’s about to get 10 timesworse. The new complexities involvedwith being in compliance with the newfinancial regulations are going to requireus to turn to technology more than everbefore. So, how do you, as the C-Levelexecutive of your company, select notonly the right technology, but the rightcompany behind the technology?

As a national consulting firm advisinghundreds of companies across the coun-try, we are often calledupon to help companiesselect the right solution. Itis for this reason that weare constantly evaluating ahost of solutions and thecompanies behind them.And I cannot stress enoughthat you must look beyondthe compliance technologyand give even more dili-gence to looking into thecompany behind the tech-nology. If you select whatlooks to be a strong com-pliance technology solu-tion, you may find that youhave a great piece of tech-nology, BUT the companythat created the technolo-gy may not have a fullgrasp of all the complexi-ties involved in complyingwith all the new regula-tions. If you turn to a goodcompliance company thathas a weak technologysolution, you will findyourself stuck with too many manualprocesses and you will not realize all ofthe efficiencies that a good technologysolution should provide you. It’s findingthe right combination of “carbon-basedsystems” (humans) and “silicone-basedsystems” (technology). It’s a delicate bal-ance and finding the right solution for youcan be harder than you think.

On a side note … each month, as Iwrite the C-Suite column, I get a lot of

feedback, most of which is very positive(and let me say how much I appreciateyour e-mails and kind comments …keep them coming … it motivates me tokeep writing this each month). If howev-er, there is one reoccurring constructivecriticism I receive from those who readthis article each month it is that I am notas specific as I could be suggesting solu-tions to the issues I raise in my articles.

The basis for this is that we as a con-sulting firm, and me, as the author of thismonthly column, do our best to remain

“vendor neutral.” Normally,there isn’t a “one size fitsall” solution and our firm ismore about finding theright solution that meetsyour specific needs thananything else. In mostcases, there is more thanone “good solution” outthere that will work.However, in the area ofcompliance and technolo-gy, that isn’t the case. Wefind ourselves consistentlyrecommending one solu-tion over and over. So, I’mgoing to appease my criticsand be very specific in myrecommendation.

Wetzel Trott, locatedin Farmington Hills, Mich.is an example of a qualitycontrol firm that usestechnology as the drivingforce in maintainingcompliance at the levelnecessary to succeed intoday’s marketplace.

Now, more then ever, you must havethe proper controls in place to ensurecompliance. They have a Web-basedquality control software known as QuiC(Quality Underwriting Integrity Control)that provides the tools necessary forauditors to identify and report compli-ance related issues. We believe thatWeb-based systems offer the best solu-tion because of the constant require-ment for updating.

For years, Wetzel Trott has specializedin quality control reviews for residentiallenders, and currently has approximate-ly 500 clients around the country.Quality control reviews are performedon conventional and government loanproduction in accordance with therequirements of Fannie Mae (FNMA),Freddie Mac (FHLMC), U.S. Departmentof Housing & Urban Development(HUD), the Veterans Administration (VA),and private investors. In addition, docu-ments are checked to confirm that theymeet federal regulatory requirements.

QuiC was developed by Wetzel Trottfor use in conducting quality controlreviews. It is a user-friendly and flexiblequality control system which also pro-vides a sophisticated level of functionsand options. It includes workflow man-agement and tracking capacity, andallows for customization within boththe review and reporting functions.

The regulatory compliance portion ofthe quality control review is housed with-in QuiC’s Doc Review Wizard. The DocReview Wizard presents question setsdesigned to guide the user through thesteps necessary in determining whetherfederal disclosures are accurate, completeand compliant with regulatory require-ments. Specifically, the Doc Review Wizardlists each document by name and thenproceeds through questions customizedto the details of the associated regulation.The question sets can be updated or edit-ed as needed when regulations change,always ensuring that the review is accu-rate and up to date.

The question sets can also be cus-tomized from a management perspectiveaccording to varying skill levels in potentialusers. The questions can be built very gen-eral for more advanced auditors or builtmore rigid for less experienced auditors.For the latter, the documents might havequestion sets built several layers deep. Thisformat guides the auditor through allaspects of consideration necessary in con-firming the acceptability of the documentsbeing reviewed. The system will not allow auser to advance without answering a ques-tion; therefore it assures a complete andthorough review. Auditors report that theylike the “prompts” built into the systemand that they think of the question sets asa checklist, yet the technology offers thatsupport in a paperless format.

The Doc Review Wizard can even becustomized according to loan type, mean-

ing that documents and associated ques-tions would only appear as applicable tothe type of loan being reviewed. For exam-ple, Right of Rescission questions will notfire on a purchase transaction. These typesof customizations promote efficiency andhelp contribute to the bottom line.

The reporting function in QuiC oper-ates similar to the review function in thatit also allows customization options. Asauditors answer the question sets, issuesare identified within QuiC and automati-cally populated to the individual auditreport. All of the issues are developed atthe management level and hard-codedinto the system. However, administrative-ly, they can be edited at any time. Issuesevolve as regulations change. With therecent changes to the Real EstateSettlement Procedures Act (RESPA), manynew issues have been added to WetzelTrott’s system and some existing issueshave been adjusted or deleted. Thisadministrative editing function providesthe ability to continually remain currentwith regulatory compliance requirements.

As part of the quality control review,Wetzel Trott also performs Truth-in-Lending (TIL) calculations in order toensure the authenticity of the TIL docu-ment being audited. A TIL Worksheet hasbeen built into the QuiC quality controlsoftware. The worksheet assists the auditorwith identifying discrepancies in financecharges, the amount financed, the annualpercentage rate (APR), and the privatemortgage insurance drop date. Essentially,the auditor enters the lender’s figures intothe system and compares those figures tohis own. The worksheet also assists theauditor in identifying discrepancies in thepayment stream. There is a separate win-dow function which helps the auditordetermine if an excess lender credit cutsinto the finance charge. Any discrepanciesidentified throughout the entire processeasily populate into report ready issues.Additional narratives, unique to the file orissue, can be added when applicable.

The feedback we have received is thatthe auditors use this system like the TILWorksheet in QuiC because it simplifies cal-culations and eliminates the potential forarithmetic errors on their part. From the C-Level management perspective, the TILWorksheet provides a “track record,” main-tained within the system, which details thesteps the auditor took during the reviewprocess. An important feature is that thehistory can be viewed at any time in the

By David Lykken

“If you select whatlooks to be a strong

compliance technologysolution, you may findthat you have a greatpiece of technology,BUT the company

that created the tech-nology may not have a

full grasp of all thecomplexities involvedin complying with allthe new regulations.”

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financial resources to maintain their FHAapproval status given the new net worthrequirements. Just to give you an idea ofhow heavy the HUD Hammer is … hereare 11 examples of recent sanctionsagainst lenders; I left the names of thecompanies out, but they can be viewed inthe Federal Register notice:

1. A Utah lender was fined$30,000 for using the HUDseal and FHA acronym ontheir Web site which gavethe appearance that it wasa government site.

2. A Rhode Island lenderwas fined $7,500 for notimplementing a qualitycontrol plan.

3. Another company wascharged $11,000 becausethey simulated a govern-ment form and seal tomake it look like theywere doing business withHUD (this one is a bigwarning for all you directmail originators).

4. A Maryland companywas required to pay morethan $425,000 because they chargedborrowers a broker fee and an origina-tion fee and failed to meet other com-pliance requirements.

5. A Missouri lender was hit with a$700,000 penalty for not reporting infor-mation according to HUD guidelines.

6. A New York firm was hit with $413,000in fees for not registering their DBAs andfor other compliance-related items.

7. One lender had their FHA approvalwithdrawn for having hired an employeethat was debarred from HUD programs,which is a violation of HUD policy.

8. Another company was charged $68,500for failing to ensure their employees werenot simultaneously working in relatedfields like real estate or title companies,and for not documenting loans properly.

9. A company was charged $674,000 fornot documenting files properly and notimplementing quality control plans.

10. A company was fined $124,000 for notimplementing a quality control plan,maintaining non-compliant brancharrangements and not reporting employ-ee W-2 income earnings.

11. A company was charged $71,000 forhiring loan officers as independent con-

tractors and for charging brokers fees inaddition to the origination fee.

This is just a sampling of some of thecompanies affected by HUD’s recentroll through the lender neighborhood.It is a clear message that in this “Age ofCompliance,” HUD means business! If

you are an originator, it’stime to open your eyesand determine if youremployer is running acompliant office. If not,you may want to exploreother companies thathave the proper staff,knowledge and commit-ment to stay compliant.

This shakedown isgood for a lot more thanproviding more revenuefor the FHA MRB. The factis that it is good news forthe industry and greatnews for all of you whowork for organizationsthat take compliance seri-ously. Companies thatinvest in compliance willcontinue to be the playersand dominate the mort-gage markets. If a compa-ny is investing in the sys-

tems to assure their compliance, it’s like-ly that they are also investing in theproper training of their sales staff andgiving them the competitive edge theyneed to sustain their growth.

When I think of well-managed com-panies who take compliance seriously,three Michigan-based companies cometo mind and I will mention these threeonly because I know the owners person-ally and they have experienced growthdespite the suffering local economy thatrelies so heavily on the success of the U.S.auto industry. As someone who hastrained companies all over the country inFHA, I can tell you that you never know ifa company, however large or small, iscompliant unless you know the leadersof the organization personally (and eventhen, sometimes you get fooled!). I sharethese companies as examples of organi-zations that put great emphasis on prop-er hiring practices and do whatever ittakes to keep a compliant office. The firsttwo I will mention are regional FHAlenders and the third has a nationalreach.

Capital Mortgage Funding in Southfield,Mich. is one of the top FHA lenders inMichigan. Co-owners Harry Glanz and DanBurke understand the importance of com-pliance and the value of maintaining goodworking relationships with correspondentlenders. In business for nearly 20 years, they

future should questions arise regarding thereview or the calculations used.

I like the fact that Wetzel Trott part-ners with a third party vendor to com-plete the re-calculation of the TIL docu-ment. After an auditor completes theQuiC TIL Worksheet, they run the calcu-lations through a third party technologysystem which calculates the APR, thepayment stream, and the private mort-gage insurance drop date. This type oftechnology partnering has become animportant aspect in navigating a clearpath through the complex area of regu-latory compliance.

It is not uncommon for companies tostruggle with the demands of keepingup with state level compliance require-ments. Wetzel Trott uses and recom-mends the use of third party vendors inproviding the support needed in thisarea. Technology links to partneringvendors can be implemented withinQuiC. Links to third party vendors pro-vide the auditor ready access to statelevel regulations and ongoing updates.Other vendors provide the tools neces-sary for high-cost testing at both thestate and federal level.

We and our friends at Wetzel Trottbelieve firmly in employing all technolo-gy resources necessary to remain currentin the area of regulatory compliance.

This includes working with vendor-pro-vided technology tools to integrate andsecure the controls necessary for a solidquality control and compliance process.It is a synergistic formula that gives you,the C-Level executive, the confidencethat you are pulling from as manyresources as possible to effectively man-age the compliance risk for your compa-ny in the ever more complex and precar-ious regulatory world in which we live.

David Lykken is president, mortgagestrategies and managing partner withMortgage Banking Solutions. David hasmore than 35 years of industry experi-ence and has garnered a national repu-tation. David has become a frequentguest on FOX Business News with NeilCavuto, Stuart Varney, Liz Claman andDave Asman with additional guestappearances on the CBS Evening News,Bloomberg TV and radio. He may bereached by phone at (512) 977-9900, ext.101 or e-mail [email protected].

To listen to author DavidLykken’s online radio show,log on to www.blogtalkra-

dio.com and type in “Lykkenon Lending” in the “Search” box onthe right-hand side of the page.

The HUD Hammer Hits Hard: FHA Withdrawals Approval Status

From 905 LendersThe Federal Housing Administration’sMortgagee Review Board (MRB) has beenbusy this year. They published a notice inthe Federal Register that announceddozens of administrative actions againstFHA-approved lenders who did not meetFHA policy requirements. In 2010 alone,up to the time of the writing of thenotice, the MRB has issued around 1,500sanctions against lenders, including “rep-rimands, probations, suspensions, with-drawals of approval and civil moneypenalties.” The following is a quote fromFHA Commissioner David H. Stevens:

“Lenders should know by now that FHAwill not tolerate fraudulent or predatorylending practices … Any FHA-approvedlender that does business with us must fol-low our standards. If we determine thatour partners are not playing by the rules,we will take action—it’s that simple.”

If you are not familiar with the FHA’sMortgagee Review Board, it is responsi-ble for issuing sanctions to FHA lendersthat violate the agency’s policy require-ments. In some extreme cases, the MRBcan withdraw a lender’s FHA approvalaltogether, prohibiting the lender fromoffering FHA programs. In other cases,the MRB negotiates settlement agree-ments with lenders to insure compli-ance. The Board can also issue letters ofreprimand and require probation, sus-pension, and civil money penalties.

Are you in compliance? As the title states, FHA withdrew the FHAapproval status of 905 lenders for failingto meet requirements of the U.S.Department of Housing & UrbanDevelopment (HUD). It’s evident thatmuch of this shake-out was from smallerbrokers and lenders that lacked the

By Jeff Mifsud

“It is a clear messagethat in this ‘Age ofCompliance,’ HUD

means business! If youare an originator, it’stime to open your eyesand determine if youremployer is running a

compliant office.”


involvement in the day-to-day operations,and a passion for doing business the rightway. They all understand that having theability to provide FHA programs is a privi-lege and should not be taken for granted.

On the other hand, I’ve had some expe-riences with less impressive and likely lesscompliant companies. In the aftermath ofthe sub-prime collapse, I did a lot of FHAtraining for what I refer to as “580 RefiShops” who had previously done only sub-prime. Talking on the phone with themand looking at their Web sites, everythingappeared compliant, but arriving at theoffice, I could practically smell non-com-pliance. I was concerned that these werethe types of companies that would likelytake advantage of the FHA programs andhammering borrowers on fees to supple-ment their lost sub-prime business. Theseare the types of lenders HUD is trying topurge from the industry and, as evidentfrom the current list of withdrawn FHAapprovals and imposed sanctions, HUD iswalking their talk.

It takes a lot of capital today to staycompliant, and if you are one of thefortunate ones to be working for a com-pany that takes their HUD complianceseriously, you should feel grateful forthat and express that gratitude to theowners of your companies, because intoday’s “Age of Compliance,” only thebest talent with the best business sys-tems will be left standing.

Go FHA!

Jeff Mifsud founded Southfield, Mich.-basedMortgage Seminars LLC in 2004, has been anFHA originator for 13 years, is a contributorto LoanToolbox.com and is a former FHAunderwriter. Jeff may be reached at (877)342-9100 or e-mail [email protected].

Visit author Jeff Mifsud’s Website at http://mseminars.comfor tips and information on

FHA loans and details fromsome of the nation’s top FHA specialists.

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www.qcmortgage.com800-939-5383

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maintain a stellar reputation amongst con-sumers and have a very high percentage ofrepeat customer business because of theirfair and honest business practices. Theyhave always invested heavily in the staffnecessary to keep their firm compliant.

The second company is SuccessMortgage Partners based in Plymouth,Mich. Headed by Vince Lee, Owen Leeand Kevin Broughton, this is a firm thatopened its doors at the onset of the mort-gage crash. Although it seemed counter-intuitive to open a mortgage company atthat time, they found it was a perfecttime. Why? Because so many smaller bro-kers had to close their offices due to highoverhead, this allowed Success MortgagePartners to absorb some of the best talentin the industry and now they are experi-encing steady growth and have becomeone of the top FHA lenders in southeast-ern Michigan. Success Mortgage remainsa solid company because of their com-mitment to compliance and the hiring ofthe right staff to make it happen.

The final company is Gold StarMortgage Financial, a firm that alsoinvests a lot of resources in complianceand their staff. Headquartered in AnnArbor, Mich. and led by Chief ExecutiveOfficer Dan Milstein and Vice PresidentRick Richter, Gold Star does business on anational level, and in August 2009, madethe Inc. 500 list for being one of the fastestgrowing mortgage companies in thecountry. This is no small feat in the face ofa challenging market! Currently, the num-ber one FHA lender in Wayne County (the13th largest county in America), Gold Starcontinues to expand because of strongcorrespondent relationships and the out-standing business systems they have inplace. Strong internal staff and well-trained loan officers assure that the com-pany will continue to be a national force.

The one trait that is common in all ofthe companies I have mentioned (and allthose like them throughout the country) isa long-term business vision, personal

Taming Mortgage Compliance:Technology is the Secret Weapon

It has been said that the mortgageindustry is a constant battle of growth,cutbacks and change. Although thesephases usually cycle through every fewyears or so, in the past 24 months we’vehad it all, and the foreseeable futurepromises more of the same. Record lowrates, tightening margins,an economy that contin-ues to limp along … and asea of regulatory compli-ance changes.

Over the past 25 years,it has been common tohave one new form of reg-ulatory change every cou-ple of years. The year 2009blew that pace away withfour new requirementsthat have substantiallychanged a lender’s respon-sibilities, and in 2010,three more will be in effectby year’s end. To add tothe challenge, existingcompliance responsibili-ties are being enforcedmore than ever by stateand federal government,as well as secondary mar-ket investors. But at leastthe challenge of compli-ance management comes with a silverlining: With the proper planning, train-ing, monitoring and tools, lenders cantame the mortgage compliance beastand achieve a greater level of efficiencythrough increased automation as well.

Planning starts with a good summa-ry of all requirements and identifyingthe impact on each employee’s role.Training should be completed on a reg-ular basis, include a review of all expec-tations, and identify the pain associat-ed with non-compliance. Most of thenew requirements apply to loan origi-nators and that’s where the biggestimpact can be made. Effective trainingshould assume that originators need tocover all aspects of compliance andtest/certify originators upon comple-tion. Most importantly, there should beclearly identified procedures, simpli-fied support systems, and a thoroughmonitoring of all requirements.

In 2009, mortgage compliancechanges included the MortgageDisclosure Improvement Act (MDIA),which identifies steps and specific timeframes for disclosing and re-disclosingprior to loan consummation. The Home

Valuation Code of Conduct (HVCC) setguidelines for the appraiser selectionand appraisal ordering process. Higher-Priced Mortgage Loans (HPML) guide-lines set a much lower threshold forloan terms that require a lender toissue additional disclosures prior to

loan consummation.The Fair and AccurateCredit Transactions Act(FACTA) amendmentsknown as the “Red FlagRules” require lenders toimplement specific pro-cedures to detect, pre-vent and mitigate identi-ty theft.

The year 2010 broughteven bigger changes,including the newly-for-matted Good FaithEstimate (GFE) and HUD-1A.On the surface, it appearssimple. However, thesenew requirements hold thelender accountable foraccurate lender and third-party service provider feeestimates. Compliance withthe Secure and FairEnforcement for MortgageLicensing Act (SAFE Act)

requires lenders, their originators, and incertain circumstances, their staff, to registerwith the National Mortgage LicensingSystem (NMLS). Additionally, the SAFE Actsets forth uniformity for originator account-ability, training, and information sharing.Additionally, well thought out initiatives bythe American Association of ResidentialMortgage Regulators (AARMR) includeestablishing a standardized reportingmethod that allows state regulators andauditors being set to single out high-risklenders and identify specific transactions foranti-predatory/high-cost legislation, Truth-in-Lending Act (TILA), Real Estate SettlementProcedures Act (RESPA), and state consumerlaw violations.

The liability associated with non-compliance can result in expensivefines, withdrawn U.S. Department ofHousing & Urban Development (HUD)-or secondary market investor approvals,and borrower recourse or litigationexpenses. The good news is that, evenwith today’s environment of rapidchange, mortgage compliance can beproperly managed. However, lendersmust be prepared to allot the appropri-ate time and resources.

By Lionel Urban

“With the proper plan-ning, training, moni-

toring and tools,lenders can tame themortgage compliancebeast and achieve a

greater level of efficien-cy through increasedautomation as well.”

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anti-predatory/high-cost monitoring, andTruth-in-Lending (TIL) audits. By integrat-ing these checks within its workflow, alender’s staff is required to complete pre-closing audits and ensures the appropri-ate corrective steps are completed prior tofunding a loan that is not in compliance.

Summarized reporting is the final pieceof the puzzle that ensures lender compli-ance. Real-time reporting identifies loansthat require disclosures, and shows whetheror not disclosures were prepared and if re-disclosure is now necessary. With the newMDIA requirements, lenders must be pre-pared to monitor APR changes and re-dis-closure with a change of 1/8 percent evenwithout a change to the loan program orfees. This can occur when mortgage insur-ance is adjusted or when even a moderatechange of the ARM index takes place.Oftentimes, these may be events outside ofan originator’s or processor’s control, andthey are typically the ones responsible forissuing such disclosures. With proper report-ing, both employees and management arenotified of non-compliance issues so theappropriate steps can be taken to becomecompliant. Combined with other elementsof an enterprise system, real-time reportingoften triggers these remedying steps auto-matically, which underscores two main ben-efit of enterprise systems: Centralized con-trol and workflow automation.

To simplify the implementation of thesetypes of systems lenders can expect work-flow requirements, compliance checks andreporting to be pre-configured and man-aged by their technology vendor. This savescountless hours of system administrationand ensures the lender is implementingbest business practices immediately.

Managing the new and existing com-pliance requirements may seem com-plex. However, mortgage companies thatmaster this change have a significantcompetitive advantage. Most small- tomid-sized lenders still use originationsoftware incapable of this level ofautomation, and most don’t addresscompliance in any comprehensive way.

With the proper planning, training,monitoring and tools, lenders can face themortgage compliance challenges of today’slending environment and effectively growtheir market share, while providing bor-rowers with superior service and financing.

Lionel Urban is president and chief executiveofficer of PCLender.com Inc., an enterprise-class mortgage technology company that sup-ports more than 250 banks, credit unions andmortgage companies. Urban is a 20-yearindustry and technology veteran. He has beenresponsible for loan production, operations,and secondary marketing, and has supervisedlending department compliance at a varietyof companies. For more information, call(877) 536-8686 or visit www.pclender.com.

Technology is the secretweaponMany retail lenders, including banks andcredit unions, still use the loan origina-tion systems popular from the early1990s until the market crash severalyears ago. These ‘off-the-shelf’ productscannot provide the required level ofautomation to ensure compliance, anddrain internal resources as companiesattempt to make up for the shortcomingswith inefficient (and inconsistent) manu-al stop-gap solutions. But lenders thatexamine the potential of a rules-basedsystem accessed over the Internet quicklysee that today’s technology is the secretweapon in managing compliance.

Today, enterprise technology systemsare very affordable and can be implement-ed in less than 60 days to simplify employ-ee compliance and management monitor-ing. Web-based systems give lenders of allsizes access to much more sophisticatedsolutions with greatly reduced administra-tive and IT support requirements.Integrated features and services that mort-gage companies should consider includesystem-based workflow rules; automatedcompliance checks; and detailed, central-ized management reporting.

Some loan systems today have theability to productively manage workflowin a variety of ways. First, lenders shouldexpect “hard stops” that ensure that orig-inators and staff gather the right data andperform the correct activities at theappropriate times. Data checks should beintegrated at all steps and be simple touse. They should prohibit issuing disclo-sures when key information is missing ornot accurate and ensure that creditreporting interfaces and other electronicinterfaces are only available when theappropriate information is gathered forgovernment reporting. Other key work-flow checks should include limiting theability to close a loan when disclosureshave not been completed correctly or in atimely manner. Most importantly, accesscontrol levels should identify the securityrights and responsibilities of eachemployee to ensure data integrity andsecurity is never compromised.

Integrated fraud andcompliance checksWith today’s vendor solutions, mortgagelenders should consider real-time valida-tions to identify fraudulent borroweractivity and prohibit lender actions thatare not in compliance with state, federal,and HUD or investor guidelines. Thesechecks should be completed as part of theorigination, processing and closingprocesses, and have the ability to catchnon-compliance before it becomes a vio-lation. This can include validating allow-able fees, disclosure or re-disclosure forspecific data or calculation tolerances,

Not too long ago, if you were responsiblefor technology in a mortgage operation,you could keep a reasonably safe dis-tance from the day-to-day details of lend-ing compliance. Over the years, however,several laws, including Sarbanes-Oxleyand Gramm-Leach-Bliley, have crept intothe world of the mortgage IT profession-al, requiring that technology work in har-mony with a legal department’s policiesand procedures.

Today, mortgage regula-tors are putting technology towork in regulatory enforce-ment. Technology profession-als and IT departments notonly need to understand thenew regulatory examinationrequirements, they also needto work more closely thanever with their complianceand operations departmentsto help adapt to a more com-prehensive, technology-dri-ven regulatory complianceenvironment.

How we got hereInitiatives at the statelevel to modernize mort-gage examinations dateback to 2007. The twoadvocacy groups that rep-resent state banking and mortgagelending regulation, the Conference ofState Bank Supervisors (CSBS) and theAmerican Association of ResidentialMortgage Regulators (AARMR), workedtogether to establish an agreement thattheir members could sign to enable thenumerous state agencies across thecountry to work more closely togetheron regulatory enforcement.

Regulators called the unprecedentedagreement the Nationwide CooperativeAgreement for Mortgage Supervision(NCA). Regulators from every state, theDistrict of Columbia and Puerto Ricosigned the agreement, enabling differentstate agencies to collaborate and shareinformation as they supervised state-reg-ulated lenders and brokers. Althoughregulators still oversee institutions intheir respective jurisdictions, multiplestates and agencies can now worktogether to examine lenders and brokersthat do business in multiple states.

To enable that kind of coordinationacross multiple jurisdictions, CSBS andAARMR looked to existing technology inthe mortgage industry to help them

gather loan information and to conductelectronic examinations, often referredto as “e-Exams.”

Technology brings it alltogetherCSBS and AARMR first contemplatedbuilding their own technology to enablethe new e-Exams. Ultimately, they choseto evaluate solutions that were alreadyavailable and in use by the mortgage

industry. CSBS and AARMRannounced in August of2008 that, following aneight-month vetting periodinvolving representativesfrom 14 states, they hadselected technology fromComplianceEase to facili-tate the collection of loaninformation and to auto-mate compliance audits onloan files.

Instead of just lookingat smaller samples ofpaper loan files by hand,regulators are using thetechnology to electronical-ly audit up to 100 percentof lenders’ and brokers’portfolios for regulatoryexaminations. These newe-Exams include, among

other things, checks for compliance withfederal laws, such as the Home MortgageDisclosure Act (HMDA), Truth-in-LendingAct (TILA), Homeownership and EquityProtection Act (HOEPA) and Real EstateSettlement Procedures Act (RESPA), aswell as the full scope of state laws,including high-cost, anti-predatory andconsumer credit laws that vary depend-ing upon how an originator is licensed.

The technology is also enabling thetype of multi-state coordination original-ly envisioned by CSBS and AARMR. Statesnow collaborate on simultaneous exam-inations of institutions that do businessin multiple states. Regulators refer tothem as “multi-state examinations.”

What to expectIn contrast to the mechanics of traditionalregulatory examinations, multi-stateexaminations will begin before examinersgo on-site. The coordinator for the exam,called the Examiner-in-Charge (EIC), willcontact the institution being audited andrequest an electronic upload of loan infor-

Getting Your Technology Readyfor Multi-State Regulatory Exams

By Jason Roth

“Running auditsahead of time enables

you to identify andmitigate deficienciesbefore you find your-self in the midst of an

e-Exam.”


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formats and the submission process. Regulators require that loan informa-

tion is submitted in a specific file formatcalled a Licensee Examination File (LEF).Details about that format are available forlicense free-of-charge to qualified entitiesat the RegulatorConnect portal. State-regu-lated institutions can license the LEF formatfor use in formatting and transmitting loan-level data required for use in e-Exams.

You will first want to make sure thatyou have all of the required loan infor-mation in an electronic form. Dependingon the size of your institution, the datamay reside in multiple systems or datawarehouses. Data gathering can be achore, as any IT professional will tell you,so that’s just another reason to startpreparations ahead of time. The LEF spec-ifications will tell you what informationyou will need to have available electroni-cally and how it needs to be formatted.

Another option for lenders and bro-kers is to check to see if your systemsalready have built-in capability to exportloans in the format needed for e-Exams.Systems of record that commonly havethe necessary information include loanorigination systems and loan documentsystems. You can talk to your technologyvendors to find out whether they havebuilt the necessary export capabilitiesinto the systems you use.

Similarly, as a mortgage technologyvendor, you should be prepared for yourcustomers to come to you asking whatyour systems can do to facilitate e-Exams.There is a portal called RCCertify, located atwww.RCCertify.org, for technology vendorsto learn more about the capabilities theycan develop to assist their clients with e-Exams. Vendors should review the e-Examfile format to see if they have most of therequired information. If so, it may makesense for them to develop export capabili-ties for their customers to use for e-Exams.

On the compliance side, institutionscan plan ahead by instituting “self-examination” policies and procedures.Compliance auditing technology is wide-ly available in the mortgage industry.You should identify a system that coversall of the tests that the examiners runand works together with your existingtechnology systems. Running auditsahead of time enables you to identifyand mitigate deficiencies before youfind yourself in the midst of an e-Exam.

You can expect that multi-state exami-nations will be more intensive and have ahigher profile than individual state-by-stateexams. Because states can share informa-tion, a compliance issue in one state canturn into an issue with many states.

On the other hand, technologyshould make examinations more uni-form and more predictable. Combiningmultiple state exams into a single multi-state examination should save time and

money in the long run. Since regulatorshave publicized the examination scopeand have made the industry aware ofthe exact tools they will be using for thenew e-Exams, you can make technologyand operational plans now so that you’llhave no surprises when your first multi-state exam comes around.

Note: This article has not been endorsedby CSBS, AARMR or any state regulator.The information contained herein isderived and compiled from numerouspublications, presentations and inter-views of regulatory officials.

Jason Roth is co-founder and SVP atComplianceEase, overseeing the compa-ny’s suite of mortgage compliance andrisk management products, includingComplianceAnalyzer, which audits loansfor compliance with federal, state andmunicipal requirements. Roth has abachelor of science degree from theCalifornia Institute of Technology(Caltech). His previous work includespositions at Adobe Systems Inc., develop-ing Acrobat and PDF document technol-ogy. For more information, [email protected] or visitwww.complianceease.com.

mation for the examination time-frame.Again, the scope of the audit may extendto all of the loans in a licensee’s portfolio,so you’ll need to have all of your own loaninformation ready before you get tappedfor an exam.

That’s where technology preparationcomes in. A good first step is to under-stand the technology that CSBS andAARMR have announced is being usedin multi-state examinations. Theseorganizations, as well as individualstate agencies, have started notifyinglicensees about the data collection andreporting that will be expected of them.

In particular, CSBS and AARMR have des-ignated that the RegulatorConnect onlineWeb portal at www.RegulatorConnect.org isthe central point for submission of elec-tronic loan information at the initiation ofan e-Exam. State examiners will use theComplianceAnalyzer and HMDA Analyzeraudit software to conduct the electronicportions of the exams.

Multi-state examinations will start off-site, with examiners receiving the requiredelectronic loan information from the insti-tution being examined. Examiners will runthe loans through the audit software toidentify loans that they want to look at inmore detail, via on-site paper copies ofloan files or electronic images.

In the initial off-site examinationphase, a lender may be scrutinized by20 or more examiners from as many as35 states. Ultimately, depending onwhether an on-site visit is deemed nec-essary, five to 10 examiners will actual-ly go on-site for the follow-up reviews.

It’s important to note that this newtype of examination is not just some far-off idea. As of July 2010, several statesare pursuing pilot off-site monitoringprograms. This means that loan infor-mation is collected and audited on anongoing basis. Regulators build “risk pro-files” of the entities they supervise, andtarget further examinations accordingly.

For example, in a recent announce-ment, North Carolina stated that it willrequire mortgage lenders and mortgagebrokers to provide the characteristics oforiginated loans in an electronic formaton a quarterly basis, within 45 days aftereach calendar quarter. The state canmake use of this information to track loanorigination violations and, in turn, rec-ommend companies for multi-stateexams.

Getting preparedWith all of these changes approachingquickly, it’s important to start your tech-nology preparations today. A good firststep is to go to the RegulatorConnect por-tal that CSBS and AARMR have designatedas the hub for the new e-Exams. Fromthere, licensees can download informa-tion about the necessary electronic data

Many mortgage originators are unknow-ingly violating the Gramm-Leach-BlileyAct (GLBA) by not adequately protectingthe non-public personal information ofborrowers. When disclo-sure docs are e-mailed,faxed or stored in an unse-cured office or file cabinet,there are often no safe-guards for privacy protec-tion as dictated by theGLBA. This exposes you,your loan officers to a less-er extent, and your lendersto potentially huge legalliability. With more regula-tory compliance scrutinythan ever before, and con-sumers more concernedabout breaches in privacy,it’s critical that we protecttheir information and our-selves from this potentiallyvery expensive liability.

eSignatures are a greatfirst step to solving com-pliance risks. eSignatureskeep client informationsecure and GLBA compli-ant. Since 2005, my company, AmericanDream Residential, has used eSignatureson disclosure docs to ensure compliancewith GLBA. In 2009, when the new RESPAlaws took effect, we were glad we madethe choice to adopt eSignatures becausethey provide an audit trail that provesReal Estate Settlement Procedures Act(RESPA) compliance, too. The audit trailcan be accessed for any signature on anydoc, and shows a chain of custody thatmitigates fraud. As an owner, this audit

trail for compliance gives me peace ofmind that is simply priceless. We knowwho signed what and when, and we don’thave to overnight documents around

seeking simultaneous sig-natures from the loan offi-cer, borrower and lendinginstitution.

eSignatures provide avery simple solution tothese formerly commoncompliance violations, butthat’s just the beginningwhen it comes to the bene-fits of using them with dis-closure docs. Our decisionto use eSignatures has alsobrought five critical advan-tages to our business:

1. We saved$61,250 lastyear thanks toeSignaturesMy company drasticallyreduced our overnightshipping bills, copier andstorage expenses. Insteadof hustling to prepare

and mail documents, we send themfrom a PC, using eSignature software andthe client can access and sign the docsinstantly. There are no fees, no wastedtime and no manual labor involved inpreparing docs for shipment. Our loanofficers sign these same documents in atimely matter. Enough said.

2. We provide betterservice to clientsWith mandated Housing and Economic

GLBA Compliance: SaveThousands on Overhead and Make

More Money at the Same TimeBy Andrew May

“With more regulatorycompliance scrutinythan ever before, andconsumers more con-

cerned about breaches inprivacy, it’s critical thatwe protect their infor-mation and ourselvesfrom this potentially

very expensive liability.”

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than 345,000 pages of paper by usingeSignatures. We are doing our part forthe environment, and we also use our“green status” to appeal to a growingniche of borrowers who appreciate ourmuch smaller environmental footprint.You can use your “green status” it inyour marketing campaigns and ourcompany hears positive comments fromprospects and clients all the time.

By now, I hope I’ve convinced you toat least try eSignatures for your disclo-sure documents. It’s really easy to getstarted and it’s shockingly affordable.There are many software applicationsavailable, so it may be a difficult choiceif you’re new to eSignature technology.We chose SureDocs from a la mode andare very happy with the results. Hereare six “must-haves” explained inlayperson’s terms, to get you on theright path:

1. Verify the software iscompliant with ESIGNand UETAThese are the laws for “legal”eSignatures and the bare minimumrequirement of your software package.

2. Insist on GLBA complianceThat’s the initial point of this articleand is a primary benefit of eSignatures,so don’t compromise. In order to com-ply with the Safeguards and PrivacyRules of the GLBA, make sure youreSignature software never sends docu-ments or non-public information inunencrypted e-mail messages. E-mailshould only used to send recipientsnotifications and instructions for view-ing the actual documents. Again, con-sumer privacy protection is critical andviolations will expose you and yourlenders to gaping legal liability. Makesure your eSignature solution protectsthe borrower’s non-public informationin your documents.

3. Get an end-to-endaudit trailFor a legitimate electronic signature andproof of compliance with other regula-tions, you need the complete documentaudit trail, including delivery, receipt,viewing and of course, signing.

4. Don’t pay more thanyou need toSome eSignature software is priced per-signature or per-document envelope.Imagine paying per-signature, fromevery party, every time you have achange on the GFE, or paying per loanfile and not knowing what yourexpense will be until you get the bill. Itcan add up very quickly, and the has-

sles of tracking it all will definitely slowyou down. Go with a solution that hasan annual or monthly fee, regardless ofloan volume.

5. If you’re new toeSignatures, go with apackage that has goodsupport and training ifyou need itIf you’ve never used eSignatures, you’llget a lot of benefit from a quick walk-through tour or even a few shortvideos. Make sure your software pro-vides introduction training and has ahelp line you can call when you havequestions.

6. Make sure the software is made for our industryNow that eSignatures are becomingmainstream, new packages seem to becoming out of the woodwork. Makesure your vendor understands lendingand your daily work. You don’t want tomiss a disclosure signature or initialbecause the software didn’t knowwhere to put your signature tags. Limityour search to lending specialists.

7. Make it easier on your-self with loan originationsoftware (LOS) integrationand automatic signaturetaggingThe best eSignature options will inte-grate with your LOS so you just “print”to the eSignature software instead of

opening multiple applications. Also,make sure your eSignature softwareautomatically places the signature tags(these are just placeholders that clearlyalert your borrowers where to sign onthe document) so you don’t have to doit yourself. You’ll save time and elimi-nate those inevitable errors from for-getting to place signature tags andbeing forced to bother your client againto get a forgotten signature.

No matter which software solution youchoose, make the move to incorporatingeSignatures in your origination business.More and more lenders are moving in thisdirection and FHA has recently announcedthey’ll accept eSignatures on disclosuredocuments by the fall. With more pressurefrom borrowers, Realtors and others,eSignatures will soon become the stan-dard. Prepare your company to be in theforefront for compliance and to capitalizeon all of the benefits.

Andrew May is founder and president ofAmerican Dream Residential, headquar-tered in Raleigh, N.C. May has morethan 20 years of mortgage banking expe-rience. A Master Certified MortgageBanker, May earned his MBA in financefrom Duke University, has owned andoperated mortgage companies, and hasworked for many large institutionalcompanies. He received the first mort-gage insurance patent in U.S. history in1999. He may be reached by phone at(919) 771-3379 or by e-mail at [email protected].

Recovery Act (HERA) delays and theunavoidable and time-consuming tasksinvolved in moving from application toclosing, you’ve got to save time every-where you can in order to close on timeand be compliant in the same amount oftime. eSignatures help keep closings onschedule because you are not burningtime waiting on signatures or documentshipping. You can have the client sign thedocuments while they are on the phonewith you. When an appraisal or inspectiontakes a little longer than anticipated,you’re covered because you have saved (atleast) two days with eSignatures at thebeginning of the process. Clients willappreciate the speed, and they know thatfast, accurate service is one of your toppriorities. We’ve heard all of the “delayedclosing” horror stories that cause hugefrustrations for borrowers. But, when yourcustomers experience the service provid-ed with eSignatures, instead of horror sto-ries, they will happily refer friends andassociates.

3. You can better satisfya new demographic ofborrowersThe United States has a steadily growingpopulation that conducts their banking,stays in touch with friends and family,rents movies, buys music, managestheir investments and even datesonline. Way back in 1997, I worked fora lender where one of the salespeoplemet his wife on the Internet. That wasunheard of in those days. Now, thosegraduating from high school and col-lege today, “digital natives,” grew upwith the Internet and prefer using itover traditional faxing or time-consum-ing office visits. For this rapidly growingdemographic, companies with onlineoptions get the business of the Internetsavvy population, while competitorswith only traditional services are play-ing catch-up.

4. We quickly turn shoppers into clientsWith eSignatures, you can have theTruth-in-Lending (TIL) and Good FaithEstimate (GFE) on an applicant’s deskwithin one min. of the application. Youcan have those documents signed with-in another minute. You can have theloan in underwriting the “same day.”Without eSignatures, the applicant willcontinue to shop around until they feeltheir loan has officially been started.eSigning is a great way to assure a bor-rower that their loan is well underwayand can prevent you from losing aclient.

5. You can becomepaperless and greenAt my company alone, we’ve saved more

In the ever-changing world of regulato-ry compliance, lenders and mortgageprofessionals are constantly being sub-jected to new requirements, and as aresult, continue to seek clear guidanceand interpretation of lending regula-tions. Despite the fact that mortgageprofessionals and lenders are continual-ly taking extensive measures to meetthese changing regulation require-ments—including investment and com-mitment in technology, training andquality control—the fight never ends.

Recently, new Real Estate SettlementProcedures Act (RESPA) regulations haveproduced another significant challengefor mortgage professionals. A recentindustry survey found that nearly 81

percent of respondents have encoun-tered difficulties in beginning to use thenew Good Faith Estimate (GFE) and theHUD-1 and HUD-1A uniform settlementstatement forms.

The new RESPA amendment, whichwent into effect May 1, 2010, made sig-nificant changes to the GFE and theHUD-1 and HUD-1A forms. Thesechanges have thrown the entire indus-try into flux, while everyone figureshow to stay compliant. According tonew regulations, lenders already haveto pay for mistakes and fines are quick-ly coming as well.

With every new set of regulations

RESPA Technology Compliance: Couldan Outside Source be the Answer?

By David Leoncavallo


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� To strengthen RESPA’s prohibitionagainst the required use of affiliat-ed businesses.

While the new GFE is intended to bean “estimate” of the loan terms andsettlement costs for such things as set-tlement and title services, title insur-ance, inspections, and depending onthe fee or service, the estimate must beeither exact or within 10 percent of thefees paid or the lender must pay theoverages and penalties will be levied.These changes are what everyone inthe mortgage industry is facing rightnow, and becoming compliant is notan option … it’s a must. Mortgage pro-fessionals across the country are ask-ing, “How can we avoid these penaltiesand stay complaint?”

With many other previous regula-tions, proper education and the simpleimplementation of new rules were suf-ficient enough to remain in compli-ance and keeping the issue in-house.However, with the new RESPA regula-tions, staying complaint means provid-ing accurate costs for local serviceproviders, such as title services and

inspection services, many of whichwere previously never quoted. As aresult, mortgage lenders are quicklyfinding themselves in the uncharteredwaters of trying to provide accuratecosts for services outside of the mort-gage industry, such ashome inspections, struc-tural inspections, watertesting, etc. I have heardof mortgage lenders hir-ing new teams of employ-ees to work on thesechanges internally, and insome cases, building sep-arate data or softwaredivisions just to work onbecoming compliant.

When completing acost analysis of how tostay compliant, one ques-tion that should be askedis, “Should we find athird-party technologyand services solutionprovider to assist us withcompliance or can wehandle this in-house?”

Weighing the cost ofstaying compliant by using a trustedoutsourced solutions provider that hasthe technology and networks in place,versus an in-house solution is an issuethat many mortgage lenders are fac-ing. Technology provided by an out-side vendor can easily solve problemsfor the lender that would otherwiserequire a great deal of time and efforton the part of mortgage professionalsand take focus away from the businessthey are in.

To stay compliant with the new GFE,HUD-1 and HUD-1A, there are outsidevendors that can provide solutions thatare guaranteed, provide mortgagelenders piece of mind when facingpotential RESPA penalties and keeptheir deals moving along.

In many cases, we learned thatmortgage professionals find it crucialto have a reliable third-party source toprovide verified information whenimplementing technology and servicesolutions to meet the requirements.We saw an opportunity to use ourmore than 30 years of experience inthe home inspection industry todevelop software, GFEazy, and make iteasy for lenders to comply with newregulations.

When weighing the costs of using anew or outsourced technology andsolutions provider, time should be thedriving factor involved. If new technol-ogy, from an outside source or not, canprovide time-saving methods withimmediate solutions in solving prob-lems and staying compliant, the savingsare multiplied. In addition to saving

time, customer service should be con-sidered as well. Are your customersgoing to see a benefit from using thisnew technology? Will the outsourcedsolution save the customer time as wellas money?

Without the use ofnewly developed technol-ogy and service solutions,lenders are facing non-compliance and thepotential cost of penaltiescan add up quickly. Onebank recently failed toinclude an $80,000 trans-fer tax on the GFE and wasresponsible for the over-sight. Another bank Ispoke with recently hassaid that they are receivingpenalties almost daily fornon-compliance. Finally,one lender recently told aborrower that his land sur-vey would cost around$450, a standard figurethat the lender had usedin their GFE for years. Theonly problem was that

the survey was to be conducted on 20acres of land and the $450 figure isaccurate for a much smaller area.Without the new regulations the differ-ence in the estimate and actual cost forthe land survey used to be changedduring the final closing and added tothe closing costs. Not any longer. Theactual total for the land survey was$4,750 and the lender was forced tocough up the difference.

The bottom line is that changes inregulations and compliance are hap-pening on a regular basis. New tech-nologies are proving to be a usefultool for many of these problems.Evaluating your specific situation,understanding the changes in regu-lation and how they could affectyour business is crucial. The mostimportant objective is to stay com-pliant. After that, look at how youcan stay compliant while also savingtime and money and providing anadded benefit to your customerbase. More times than not, an out-side technology solutions providercould be the answer.

David Leoncavallo is the founder, man-aging director and president of Salt LakeCity, Utah-based Sopra Capital. Prior tofounding Sopra, 10 years ago, he found-ed and developed an executive recruitingfirm focused on franchise recruiting,FranSearch, a company that has becomeone of the largest franchising executivesearch firms in the world. He may bereached by phone at (801) 503-9210 or e-mail [email protected].

that face mortgage professionals bringsa new set of compliance challengesthat must be met. Staying on top of allthe new compliance rules can be chal-lenging enough, so how can the use oftechnology help you win the complian-cy battle? When should you use an out-side company to assist with your com-pliancy issues?

The new RESPA regulations presenta unique set of challenges for mortgageprofessionals, because staying compli-ant means having real-time data. Therevised GFE is now a three-page form,reflecting the additional informationlenders must now disclose. The U.S.Department of Housing & UrbanDevelopment (HUD) had several goalsin revising the GFE:

� To encourage and make it easier forconsumers to compare loan optionsand closing costs;

� To increase the accuracy of settle-ment costs listed on the GFE byimproving disclosures of yield-spread premiums (YSPs);

� To facilitate comparison of the GFEand HUD-1/ HUD-1A forms; and

“Staying on top of allthe new compliance

rules can be chal-lenging enough, sohow can the use of

technology help youwin the compliancy

battle?”

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GSF Wholesale - The Safe Place for

your business!

“Protect your loans with GSF” Contact the Client Relations Manager today at

1-877-494-4448or [email protected]

Originating and closing loans these days can be very challenging. Lengthy turn times, inexperienced underwriters, and high costs can contribute to fewer closed loans.

GSF Wholesale is the safe and secure place for all of your business. Our experienced staff is dedicated to ensuring your loans are protected. With seasoned underwriters, effi cient quality control department and competitive pricing, GSF Wholesale is focused on you and your business every day to meet the challenges of the new lending environment.

G S F S a l e s . c o m

materials. The HUD Secretary will appoint the OHC’s director and this new officewill be given rule-making authority with respect to its administrative mission. TheOHC will certify counselors under the authority of certain federal housing laws.Mortgage ServicingThe Act also amends TILA with regard to servicing, requiring a lender to establish,prior to consummation, an escrow or impounds account for most mortgage loanssecured by a first lien on the consumer’s primary residence.14 New consumer dis-closures relating to an escrow or impounds account will be required.

Prohibited practices include (1) obtaining force-placed hazard insurance (unlessexemptions apply), (2) charging fees for responding to valid qualified writtenrequests (QWR) from consumers,15 (3) delayed or belated responses to alleged pay-ment allocation errors (i.e., response required within ten business days to an infor-mation request from a consumer relating to the owner or assignee of the loan).

Posting of payments to the consumer’s escrow or impounds account must beimplemented as follows: (1) apply the payment amount to the loan account on thedate of receipt; (2) within five days of receipt if the consumer does not pay inaccordance with the servicer’s payment instructions; and, (3) within a reasonabletime not to exceed seven business days for a payoff.

Appraisal RequirementsFor higher-risk mortgages,16 prior to extending credit and at no cost to the appli-cant, the lender must obtain an appraisal that includes a physical property visit.In certain circumstances, a second appraisal may be required.

New standards for appraisal independence are to be implemented and severalregulatory agencies will be involved in setting rules for the registration and ensu-ing supervision of appraisal management companies (AMC). Automated valuationmodels are permitted (AVM), however new quality control requirements will bepromulgated by the affected regulatory agencies.

Mortgage Resolution and ModificationThe HUD Secretary will establish a program to protect tenants’ rights and multi-family properties that are at risk. The Home Affordable Modification Program(HAMP) is to receive special attention by the Treasury Secretary in a tasking todevelop guidelines that permit borrowers denied a request for mortgage modifica-

tion under HAMP to use borrower-related and mortgage-related data for net pres-ent value analyses (NPV). A website is to be created that offers an NPV calculator.

Other Provisions� GAO review: A mandate for the GAO to conduct a study on interagency efforts

to address mortgage foreclosure rescue scams.

� HUD review: A mandate to study the effects of the “Chinese drywall” on resi-dential mortgage foreclosures.17

� Congressional review: Consideration to the structural reform of government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac.

� Funds for HUD: $1 billion in emergency mortgage assistance and $1 billion forstate and local governments for the redevelopment of abandoned and fore-closed homes.

� Legal assistance: HUD Secretary to establish a grant-making program for legalassistance to low- and moderate-income homeowners, tenants relating tohomeownership preservation, tenancy associated with home foreclosure, andalso to those seeking to prevent foreclosure of their homes.

� SAFE Act registration: Among amendments to the SAFE Act, the requirementto establish and maintain a system for registering employees of depositoryinstitutions (and their subsidiaries) regulated by a federal banking agency asregistered loan originators with the Nationwide Mortgage Licensing System andRegistry (NMLS) is transferred to the Bureau.

If not now, when?Various authorities will be transferred to the new Bureau. Many features of theconsumer protection laws will be administered by the Bureau, which will becomethe administrator for the “federal consumer financial laws.” In other words, near-ly every existing federal consumer financial statute, as well as new consumerfinancial protection mandates prescribed by the Act, will become the “enumerat-ed consumer laws” transferred to the Bureau’s authority.18

On the one hand, regulations will be required to be finalized within 18 monthsof the designated date of transfer of authority to the Bureau. Then, those regula-



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“A reverse mortgage is a financialoption in today’s economy that every sen-ior should at least know about and con-sider. It is a retirement tool that can pro-vide them with security and piece ofmind in planning their retirement years,”said Marino. “Total Mortgage’s modeloffers significant value to all its clients bycombining low mortgage rates—maybethe lowest rates in the industry—andgreat service. We are committed to mak-ing sure a senior makes the right choicesat this critical time in their lives.”For more information, visit www.tmsfunding.comor www.TotalMortgage.com/reverse-mortgage.asp.

Bank of America becomeslargest servicer to sign onwith HOPE LoanPort

HOPE LoanPort, the Web-based housingcounselor tool that streamlines submis-sion of completed loan modificationapplications, has announced that Bankof America has agreed to use its propri-etary technology to partner with non-profit housing counselors to assisthomeowners with loan modifications.Bank of America becomes the 11thmortgage servicer to sign onto HOPE

LoanPort. The company joins other ser-vicer members American HomeMortgage Servicing Inc., Bayview LoanServicing, Chase, Citi, GMAC, OcwenLoan Servicing, OneWest, PNC Mortgage,Saxon Mortgage Services and SunTrustMortgage Inc.

HOPE LoanPort also has commit-ments from more than 200 counselingorganizations across the country and isendorsed by House Majority Leader,Congressman Steny Hoyer (MD) and theMaryland Department of Housing andCommunity Development.

“We are making great progress inhelping our financially troubled cus-tomers complete loan modifications,now leading the industry in modifica-tions completed and modification offersextended through HAMP,” said Rebecca

Mairone, default servicing executive forBank of America. “The nation’s housingcounselors play a critical role in thisprocess, working hand in hand withstruggling homeowners. We believeHOPE LoanPort will enable us to moreconveniently and reliably work withapproved counselors as an extension ofour team, working with our customersto achieve sustainable homeownershipsolutions.”

“This is a significant development inthe evolution of HOPE LoanPort, withfar reaching implications,” said LarryGilmore, chief executive officer ofHOPE LoanPort. “By adding Bank ofAmerica to our roster, we now havetwo of the three largest mortgage ser-vicers in the country signed up to useour Web portal. In addition, Bank ofAmerica and our ten other mortgageindustry partners represent the majori-ty of loans serviced throughout theUnited States. We are convinced thatHOPE LoanPort is the future of simpli-fying the loan modification process forhomeowners, servicers and counselors.With the nation’s largest mortgage ser-vicer on board, we certainly feel thatthis assertion is validated.”For more information, visit www.hope-loanportal.org or www.bankofameri-ca.com.

Gateway Funding launches new \correspondent division

Gateway Funding Diversified MortgageServices LP has announced its recentlaunch of its Correspondent LendingDivision, buying loans from lenders,bankers and financial institutions inthe Mid-Atlantic States. GatewayFunding Correspondent will offer arange of products, best in class turntimes for underwriting and purchases,a customized servicing retentionoption, government sponsorship andmuch more.

“It’s time for the market to get backto the basics of bringing value to a long-term relationship, everyone wins whenyou are committed to doing it the rightway for the long term”, said BrunoPasceri, president and chief executiveofficer at Gateway Funding. As a strate-gic initiative, Gateway Funding has itseye on the FHA 203k Renovation Loanprogram. “Lenders today are looking forthe next loan program that makes sensefor the borrower, adds value and buildsour communities. The 203k renovationprogram is just that opportunity.”

Demand for renovation lendingproducts is likely to continue increas-ing over the next several years. Lenderschoosing to promote renovation lend-ing as a strategic initiative should ben-efit from this growth and the opportu-nities for added profitability associatedwith these products.For more information, visit www.corre-spondent.gateway-funding.com.


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REMEMBER THE“GOOD OLD DAYS”?

…When you could speak directly witheasy-to-reach underwriters who issued fast approvals with common sense underwriting? Well so do we.

Go Back in Time.At Terrace Mortgage Company, we believe inproviding friendly, fast service with a personaltouch, and we’ve done just that for 22 years. Wepride ourselves on our easy-to-reach, seasonedunderwriters who use common sense and offerunparalleled support by phone or email everystep of the way. And we understand you need toclose quickly. So we send a link with the closingpackage directly to the closing company rightafter you get a clear-to-close.

Terrace Mortgage CompanyCelebrating 22 years of wholesale lendingwww.terracemortgage.comSandy Garcia, National Sales Director (866) 934-4631, ext 301

NMLS#7101

tions become effective not later than 12 months after the regulations are issued.On the other hand, some provisions do not require implementing regulations andpresumably would not be subject to the above-mentioned time period—whichmeans, therefore, that the effective compliance date for certain provisions wouldactually be right after the enactment of the Dodd-Frank Act. Those regulationswould include the restrictions on MLO compensation, certain disclosure require-ments, and changes to financial triggers on “high-cost” loans under theHomeownership and Equity Protection Act (HOEPA).

In the second part of this series, we will discuss the Mortgage Reform andPredatory Lending Act. And, in the third and final article we will consider not onlythe formation and powers of the new Bureau of Consumer Financial Protectionbut also the overall implications of the Act for the mortgage industry.

Jonathan Foxx, former chief compliance officer for two of the country’s top publicly-traded residential mortgage loan originators, is the president and managing direc-tor of Lenders Compliance Group, a mortgage risk management firm devoted to pro-viding regulatory compliance advice and counsel to the mortgage industry. He maybe contacted at (516) 442-3456 or by e-mail at [email protected].

Footnotes1—Press Release, June 25, 2010, The White House Office of the Press: “Remarksby the President on Wall Street Reform.”

2—Vote was 60 to 39. Three Republican Sens. Scott Brown (MA), Olympia J. Snowe(ME) and Susan Collins (ME), joined 57 members of the Democratic caucus. Sen.Russell Feingold (WI) was the lone Democratic opponent, saying the measure did-n’t go far enough.

3—Speech on the House Floor, June 27, 2005, In Recognition of NationalHomeownership Month, A Resolution (You Tube) http://bit.ly/HJAtd.

4—See Foxx, Jonathan, “The CFPA Controversy: Asking the Tough Questions,” inNational Mortgage Professional Magazine, October 2009, Volume 1, Issue 6, pp 22-25, which recites that at least 16 consumer protection laws are affected or trans-ferred to the Bureau, mutatis mutandis “enumerated,” including AlternativeMortgage Transaction Parity Act (AMTPA), Community Reinvestment Act (CRA),Consumer Leasing Act (CLA), Electronic Funds Transfer Act (EFTA), Equal CreditOpportunity Act (ECOA), Fair Credit Billing Act (FCBA), Fair Credit Reporting Act(except with respect to sections 615(e), 624 and 628) (FCRA), Fair Debt CollectionPractices Act (FDCPA), Federal Deposit Insurance Act, subsections 43(c) through43(f)(12) (FDIA) Gramm-Leach-Bliley Act, sections 502 through 509 (GLBA), HomeMortgage Disclosure Act (HMDA), Home Ownership and Equity Protection Act(HOEPA), Real Estate Settlement Procedures Act (RESPA), SAFE Mortgage LicensingAct (S.A.F.E. Act), Truth in Lending Act (TILA), and Truth in Savings Act (TISA).

5—Chart by John Hall of the American Bankers Association, from “Every DeathMarch Starts With A First Step,” Kevin Funnell, July 15, 2010, Bank Lawyer’s Blog:http://bit.ly/cQOMhb.

6—The theory of Black Swan events was developed by Nassim Nicholas Taleb toexplain the disproportionate role of high-impact, hard-to-predict, and rare eventsthat are beyond the realm of normal expectations in history, science, finance andtechnology. In other words, according to Taleb, almost all major scientific discov-eries, historical, financial, and technological events, and artistic accomplishmentsare undirected and unpredicted. If this is so, it seems to me that a derivativehypothesis would be that government regulations will tend to react to rather thancounteract or prevent such crises. See: The Black Swan, Taleb, Nassim Nicholas,2007, Random House.

7—Some legal experts say Section 929I of the Act could be interpreted to meanthat the SEC can set its own rules about how to respond to Freedom ofInformation Act requests and that, potentially, the majority of SEC records couldbe exempt from public disclosure. The wording of the section says that the SECshould not be compelled to disclose records or information obtained “for use infurtherance of the purposes of this title, including surveillance, risk assessments,or other regulatory and oversight activities.” Rep. Darrell Issa (R-CA), the rankingmember of the House Committee on Oversight and Government Reform, intro-duced legislation (HR 5924) back in May to repeal Section 929I. However, twoother provisions have been identified that, in the interest of helping corporationsshield information from the public, allow the SEC to ignore certain court subpoe-nas and FOIA requests.



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SAVE THE DATE!Join the 2010 NAMB/WEST Conference

December 4-6, 2010 at the MGM Grand Las Vegas!


For more details on Exhibiting and Sponsorship, please contact Kinsley at 303-798-3664 or [email protected]

Exhibitors will receive a complimentary ad in the December issue of the National Mortgage Professional

Exhibitors and Sponsors

8—Section 1503(3)(A)(i) of the SAFE Act defines “loan originator” as “an individualwho (I) takes a residential mortgage loan application; and (II) offers or negotiatesterms of a residential mortgage loan for compensation or gain.” Section1503(3)(B), entitled “Other Definitions Relating to Loan Originator” provides “Forpurposes of this subsection, an individual ‘assists a consumer in obtaining orapplying to obtain a residential mortgage loan’ by, among other things, advisingon loan terms (including rates, fees, other costs), preparing loan packages, or col-lecting information on behalf of the consumer with regard to a residential mort-gage loan.

9—Among amendments to the SAFE Act, the requirement to establish and main-tain a system for registering employees of depository institutions and their sub-sidiaries regulated by a federal banking agency as registered loan originators withthe Nationwide Mortgage Licensing System and Registry is being transferred to theBureau.

10—The Mortgage Reform Act re-designates 15 U.S.C. 1639a of TILA as section129A and adds new section 129B: see 129B(c).

11—The Act expressly permits compensation to a creditor upon the sale of a con-summated loan to a subsequent purchaser (i.e., secondary market transaction).And a consumer may finance origination fees or costs, as long as the fees or costsdo not vary based on loan terms or the consumer’s decision to finance such fees,providing this financing takes place at the consumer’s option and solely throughprincipal or rate. See Second Summary of Mortgage Related Provisions of theDodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173),07/13/10, Mortgage Bankers Association

12—For a general description of predatory lending, see “Expanded Guidance forEvaluating Sub-prime Lending Programs,” FIL-9-2001 (01/31/01) which states thatpredatory lending involves at least one, and perhaps all three, of the followingelements: (1) making unaffordable loans based on the assets of the borrowerrather than on the borrower’s ability to repay an obligation; (2) inducing a bor-


rower to refinance a loan repeatedly in order to charge high points and fees eachtime the loan is refinanced (“loan flipping”); or (3) Engaging in fraud or deceptionto conceal the true nature of the loan obligation, or ancillary products, from anunsuspecting or unsophisticated borrower.” Other federal and many state guide-lines add even broader definitions to the meaning of predatory lending.

13—See TILA, Section 129C(b)(2) for the definition of “qualified mortgage,” whichincludes most residential mortgage loan products, and also includes reverse mort-gages (see: TILA Sec. 129C(b)(2)(A), as added by Sec. 1412 of the Dodd-Frank Act),although there is an exemption for reverse mortgages or bridge loans with a 12month or less repayment period.

14—Used to pay taxes and hazard insurance and, if applicable, certain other costswith respect to the secured property; must remain in place for at least five yearsafter loan consummation.

15—Section 6 of RESPA requires the lender (or servicer) to acknowledge receipt ofthe QWR within 20 business days and must try to resolve the issue within 60 busi-ness days.

16—See: TILA Sec. 129H, as added by Sec. 1471 of the Dodd-Frank Act. “Higher-risk mortgage” means a residential mortgage loan (other than a reverse mortgagethat is a qualified mortgage) secured by a principal dwelling that (a) is not a qual-ified mortgage and (b) has an annual percentage rate (APR) that exceeds the aver-age prime offer rate for a comparable transaction as of the date the interest rateis set. For thresholds, see also TILA Sec. 129H(f), as added by Sec. 1471 of theDodd-Frank Act.

17—In 2009, the Chinese drywall controversy reached Congress as a health andsafety issue involving defective drywalls manufactured in China and imported bythe United States starting in 2001. It is also considered an issue in many foreclo-sures. And in May 2009, the House passed an amendment to the MortgageReform and Predatory Lending Act (HR 1728) that would require HUD to studythe effects of tainted Chinese drywalls on foreclosures and the availability ofproperty insurance.

18—Op.cit. 4, provides the “enumerated laws,” to which add Section 626 of theOmnibus Appropriations Act and the Interstate Land Sales Full Disclosure Act.

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Former Sen. FredThompson named reversemortgage spokesman forAmerican Advisors Group

As part of American Advisors Group’s (AAG)strategic growth plans to be the largestprivate national reverse mortgage lenderin the country, AAG has secured formerSen. Fred Thompson as the company’sspokesman. Sen. Thompson remainsactive in politics and the national debate,and hosts a nationally-syndicated radioshow and recently released his memoirabout growing up in Tennessee, Teachingthe Pig to Dance. As spokesman for AAG,Thompson will provide the credibility,integrity, and policy knowledge needed toensure the longevity and growth ofreverse mortgages, an important financialtool for seniors.

“I am proud to join AAG’s efforts. Inthis tough economic climate, it’s impor-tant that America’s seniors know all theiroptions, and have the facts they need tomake informed decisions about theirfinancial and retirement futures,” saidSen. Thompson. “Reverse mortgagespresent opportunities for seniors to stayin their homes and enjoy their retire-ments, and I look forward to informingAmerica’s seniors of the benefits of thisoften misunderstood financial product.”

“We are delighted to have Sen.Thompson on board and know this will bea game changer—not just for AAG but forthe reverse mortgage industry as a whole,”said Reza Jahangiri, chief executive officerof AAG. “AAG looks forward to Sen.Thompson helping take our brand, com-pany and industry to the next level. Heand his experience will be invaluable asAAG further develops their reverse mort-gage platform in the coming months.”

Sen. Thompson, a Republican, waselected to the U.S. Senate fromTennessee in 1994 and retired in 2003.Since then, he has remained active innational and international affairs andpublic service. He was Chairman of theInternational Security Advisory Boardat the U.S. Department of State and amember of the U.S.-China Economicand Security Review Commission.

As an actor, Thompson has appearedin such successful films as No Way Out,In the Line of Fire, Die Hard II, Days ofThunder and The Hunt for Red October.In late 2002, Thompson joined the castof the long-running NBC television seriesLaw & Order, playing Manhattan DistrictAttorney Arthur Branch.For more information, visit www.aagre-verse.com.

HUD selects HomeTelosto market residentialinventory

HomeTelos LP,a Dallas-based

real estate services and technology firm,and an approved GSA Schedule

Contractor, has been selected by the U.S.Department of Housing & UrbanDevelopment (HUD) to provide new andadvanced marketing strategies to sellHUD’s single-family residential portfolioin five geographic regions encompassingAlabama, Arkansas, Colorado, Delaware,District of Columbia, Florida, Georgia,Illinois, Indiana, Kansas, Kentucky,Louisiana, Maryland, Mississippi,Missouri, New Mexico, North Carolina,Ohio, Oklahoma, Pennsylvania, PuertoRico, South Carolina, Tennessee, Texas,U.S. Virgin Islands, Utah, Virginia andWest Virginia.

“We are eager to work with the pro-fessional real estate community in eacharea to aggressively market thesehomes and create solid homeowner-ship opportunities,” said StephenPolley, president of HomeTelos. “Ourteam has a tremendous respect for thecommunities in which we will work andlooks forward to engaging real estatebrokers and appraisers to provide thecritical local market expertise we knowis key to successfully selling residentialassets.”For more information, visit www.home-telos.com.

Mortgage Professionalsto Watch� Paul M. Peters, CMB has joined

Mortgage Banking Solutions as asenior mortgage consultant.

� David M. Moffett, former chief exec-utive officer of Freddie Mac, hasbeen named to the board of directorsof CIT Group Inc.


Paul M. Peters, CMB

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Calyx launchesMyCalyx.com platform

Calyx Software, aprovider of mort-gage solutions for

banks, credit unions, mortgage bankersand brokers, has announced the launchof MyCalyx.com, the self-service Web por-tal for users of Calyx solutions. MyCalyxsimplifies Calyx account managementwith convenient Web access and greateradministrative control over Calyxaccounts, allowing customers to spendmore time building their businesses.

With MyCalyx, customers can savetime and money on installation andupgrades of Calyx software. Downloadingthe software is quick and easy for eachuser assigned a login and password.Customers also now have greater controlover seat assignments and can makechanges with just a few clicks vs. unin-stalling and reinstalling CD applications.

“We’ve always been the low-costprovider of quality software, and weare pleased to provide this significantconvenience to our valued cus-tomers,” said Ted Hicks, product man-agement group director for CalyxSoftware. “The added functionality ofhaving a Web portal allows greatercontrol while keeping the process sim-ple and the cost down.”

Point 7.3, scheduled for release inOctober, 2010, will be the first softwareupdate to be deployed exclusively viaMyCalyx. Beginning with this release,MyCalyx will offer additional benefit of aconvenient e-commerce engine thatenables new customers to purchase soft-ware and existing customers to purchaseadditional seats or upgrade their software.

Training classes will also be available forpurchase via MyCalyx at a later date.For more information, visit www.calyx-software.com.

LendingTree launchesmortgage quote app forBlackberries

LendingTree hasannounced thelaunch of its first

Blackberry app, the Mortgage RateFinder,now available at Blackberry App World.The free application allows users toobtain on-the-spot loan offers anony-mously.

“In today’s low-rate mortgage environ-ment, it’s important for consumers to shoparound to ensure they’re receiving the bestpossible rate,” said Doug Lebda, founderand chief executive officer of LendingTree.“In fact, since the introduction of our iPhoneMortgage RateFinder app in January, con-sumers have received more than 51,000loan offers from participating lenders.”

The free Mortgage RateFinder Appis extremely user friendly. Consumerssimply enter information about theloan they would like and the app willinstantly provide users with up to 30different, customized loan offers fromnetwork lenders. Once a great offer isfound, users can simply click to becontacted by that lender and moveforward with the loan request.

LendingTree is committed to pro-tecting the privacy of all its customers.That’s why the Mortgage RateFinderonly transmits a user’s personal infor-mation when that consumer requeststo be contacted by a specific lender.Until that point, the search is anony-

mous and no lender can contact youwithout your pre-approved consent.For more information, visit www.lend-ingtree.com/appstore.

Xetus releases newextension to loan management platform

Xetus has announcedthe addition of a newmodule to XetusOne,

a Web-based loan management platform.The new features enable lenders to ana-lyze risk and mitigate losses when makingdecisions on loan modifications andHELOC extensions. Lenders’ need for theseunique capabilities is urgent, as they expe-rience an unprecedented number of loanmodification requests from borrowers inneed of payment relief. This growing trendis expected to persist for at least the nextthree to five years as depressed home val-ues, high unemployment rates, and tight-ened credit conditions continue to linger.

According to estimates, more than$1 trillion of ARMs will reset from 2010to 2012. Bank of America added 24,000borrowers to its ranks of HomeAffordable Mortgage Program (HAMP)loan modifications in April—a figurethat doubled the company’s previousall-time high from one month earlier.

“With this new module, clients contin-ue to receive the superior, collaborativequalities of XetusOne’s framework,” saidScott Stein, Xetus’ vice president of salesand marketing. “Its expanded risk analy-sis features are unique because they givelenders the tools to efficiently restructuredebt and modify loans—including stan-dard modifications, HAMP and 2MP mod-ifications, and HELOC extensions.”

Moreover, because the new capabili-ties are available as a standalone appli-cation, any lender not already usingXetusOne can utilize just this specific setof features on a per-loan pricing basis.

The addition of XetusOne to a lender’sexisting workflow requires little effortbecause XetusOne’s SaaS capability allowsthe lender to access the service through anInternet browser. “Lenders have immedi-ate access to XetusOne because there is nospecial software to install or maintain,”said Stein. “They are immediately able toturn what is typically a very paper-inten-sive process into a paperless one.”

XetusOne’s architecture allows straight-forward integration with the lender’s lega-cy servicing platform, providing the datato be used by XetusOne in making itsdeterminations. These automatic determi-nations allow effortless re-examinations offinancial risk, minimizing exposure in afluctuating market by identifying situa-tions where either a short-term or long-term modification makes sense.For more information, visit www.xetus.com.

CoreLogic to provideforeclosure data forYahoo! Real Estate

CoreLogic hasannounced that itwill provide fore-closure data and

property information to the Yahoo! RealEstate foreclosure service. Yahoo! Real

Estate, one of the leading real estate list-ings Web sites, provides users with nation-wide distressed property listings includingforeclosure and pre–foreclosure proper-ties. The site also provides users with datatrends and tips for acquiring distressedproperty as a primary residence or invest-ment opportunity. Through this alliance,Yahoo! users will enjoy the industry-lead-ing data resources of the CoreLogicRealQuest platform.

The CoreLogic platform uses data cover-ing 97 percent of U.S. residential properties(145 million) in 3,141 counties and 99.7percent of the U.S. population to ensurethat listings are comprehensive and timely.

CoreLogic became a publicly tradedcompany on June 2, 2010 trading underthe ticker CLGX on the NYSE. The compa-ny, which provides real estate data to busi-ness, government and the media, plans toexpand its data offerings to consumersthrough key partners such as Yahoo! Thepartnership enhances Yahoo! Real Estate’sforeclosure offerings by providing accessto listings of properties at various stages offoreclosure or real estate-owned (REO).

The deal will also introduce a new fea-ture called CoreScore that allows con-sumers to evaluate the value of a specificproperty. CoreScore reports will provideYahoo! users with a qualitative “grade”on a foreclosure property based on mul-tiple factors that affect the home’s valuesuch as crime rates, school systems andsurrounding real estate activity.

CoreLogic has built a comprehensiveU.S. real estate, mortgage applicationand loan performance databases andsupplies its property-level data to busi-ness and government customers. TheCoreLogic RealQuest site, and now theYahoo! portal, allows individual con-sumers to access this valuable data forpersonal and single-property use.

“Partnering with Yahoo! brings our tar-geted, property-level real estate data to con-sumers on a widespread basis,” said GeorgeLivermore, group executive for data andanalytics, CoreLogic. “As a new company,our announcement with Yahoo! is indicativeof the kind of strategic partnerships we’lllook to forge to bring our data to more con-sumers. Yahoo! Real Estate is a tremendousresource for people who want to investigateand pursue real estate opportunitieswhether to live in or as investments, andwe’re glad to be part of that resource andenhance the experience for Yahoo! users.”For more information, visitrealestate.yahoo.com or www.corelogic.com.

Your turnNational Mortgage Professional Magazineinvites you to submit any informationpromoting new “niche” loan programs,new products or any other announce-ment related to the introduction of a newprogram, to the attention of:

New to Market columnPhone #: (516) 409-5555

E-mail:[email protected]


Lykken on Lending is a weekly 60-minute show hosted by mortgage veteran of 37 yrs, David Lykken, along with special guest

Alice Alvey & Joe Farr as well as featured special guests. Eachweek we provide our listeners with up-to-the-minute information

of what is happening in mortgage and housing industry.

Sign-on weekly atnmpmag.com/lykkenonlending

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presented by the The New Jersey Association of Mortgage Brokers and The Pennsylvania Association of Mortgage Brokers

Visit www.njamb.org for more information on Exhibit and Individual Attendee Registration

MONDAY, SEPTEMBER 20, 2010

11:00 a.m. Golf Outing Check In — Harbor Pines, Egg Harbor City, NJ

12:00 Noon Lunch at Golf Course — Harbor Pines

9:00 a.m. - 6:30 p.m. Continuing Education: 8-Hr SAFE Course (includes 1-Hr PA)

7:00 p.m. - 9:00 p.m. Opening Networking Cocktail Reception in the Exhibit Hall

TUESDAY, SEPTEMBER 21, 2010

8:30 a.m. - 9:00 a.m. Continental Breakfast

9:00 a.m. - 12:30 p.m. General Session

12:30 p.m. - 5:30 p.m. Exhibit Hall Open

12:30 p.m. - 2:00 p.m. Lunch in Exhibit Hall

2:30 p.m. - 4:00 p.m. Panel: Branch Opportunities for Mortgage Brokers

4:00 p.m. - 5:30 p.m. Special FHA Sessiona) How should Brokers prepare to work with Lenders under the new FHA ruling.b) How to originate and process FHA Loans.

6:00 p.m. - 8:00 p.m. Networking Cocktail Reception

WEDNESDAY, SEPTEMBER 22, 2010

9:00 a.m. - 12:00 p.m. Concurrent ProgramsMeet FHA Lenders & Companies offering Net Branch Opportunities at Roundtables(In order to purchase a table you MUST be an exhibitor for the exhibit hall)

10:30 a.m. - 12:00 p.m. Panel: Opportunities in obtaining Warehouse Lines

12:15 p.m. - 1:30 p.m. Luncheon with Speaker: Mortgage Fraud Scams - How to Avoid Them!

1:30 p.m. - 5:30 p.m. 4 Hr NJ State Laws Pre-license Education

1:30 p.m. - 3:00 p.m. Panel: How to Increase Client Credit Scores

3:00 p.m. Conference Ends

TENTATIVE PROGRAM AT A GLANCE


� Former United States Senator andSecretary of the U.S. Department ofHousing & Urban Development (HUD)Mel Martinez has joined JPMorganChase to serve on the company’s execu-tive committee, serving as a senior exec-utive for the company’s Florida, Mexico,Central America and Caribbean regions.

� Chad Johnson has joined MeridianCapital Group LLC as managing direc-tor in the company’s commercial orig-inations group.

� Gold Star Mortgage Financial Grouphas added Dave Prichard as the com-pany’s new chief operating officer.

� Tod Highfield, former co-founder ofDecision One Mortgage, has joinedQuicken Loans to serve communitybanks and credit unions through thecompany’s new division, QuickenLoans Mortgage Services.

� Inlanta Mortgage has announcedthe hiring of Indar Ramadhar as afunding manager.

� Valuation Partners has namedJohn Golletti vice president, nation-al account executive and DanKennard vice president, operations.

� Prospect Mortgage has named JoelEpstein REO manager for the com-pany’s southeast region.

� Lisa A. Pendergast, managing directorof CMBS strategy and risk for Jeffries &Company, has been named presidentof the CRE Finance Council, a com-mercial real estate trade association.

� The National Reverse MortgageLenders Associaiton (NRMLA) haselected Cheryl McNally, vice presi-dent—national sales manager of the

senior products group for Wells FargoHome Mortgage, and John Nixon,reverse mortgage sales support andsales integration executive for Bank ofAmerica, as association co-chairs.

� PMI Mortgage Insurance has addedfour new sales executives: BrianRowland for the Kansas, Oklahoma,western Missouri and northwesternArkansas regions; Dave McGill for theUtah and northeast Nevada regions;Dave Stephan for the Wisconsin andupper Michigan regions; and DanPutney for the upstate New York region.

� Ken Keranen has joined HomeServicesLending, a joint venture betweenHomeServices of America (a BerkshireHathaway company) and Wells FargoHome Mortgage.

� Lisa Bullington has been namedmanager of the Pennsylvania branchof Iwayloan LP.

� UnitedTech Lender Services (UTLS) hasannounced the hiring of the followingnew employees: Shane Durham as direc-tor of information security; Jeffrey Horrellas senior vice president, national sales;Rebecca Wilkinsas managing principal ofUTLS Consulting Services; MercedesEsposito-Burns as a principal of UTLSConsulting Services; and Sandra Fariasas UTLS Consulting Services principal.

� Clayton Holdings has announced theappointment of Brian R. Clark as sen-ior managing director and businessdevelopment officer for the compa-ny’s commercial real estate division.

� The Macquarie Group has added thefollowing individuals to its commercial

mortgage finance and commercialmortgage-backed securities (CMBS)team: Randy Reiff as managing direc-tor and head of commercial mortgagefinance and CMBS; Mark Lebowitz asmanaging director; James Conopaskas managing director, Simon Breedonas senior vice president, MatthewWeinstein as senior vice president,and Andrew Flack as an associate.

� Kevin Brungardt has been namedchief executive officer of RoundPointFinancial Group.

� Chase has named Cynthia Thompsonas national manager of its ChaseHomeownership Centers.

� Braver Stern Securities LLC hasannounced the addition of ScottBuchta as a managing director andthe head of investment strategy.

Your turnNational Mortgage Professional Magazineinvites its readers to submit any infor-mation, events, passages, promotions,personal or professional occurrencesthat seem appropriate and/or other per-tinent data to the attention of:

Heard on theStreet/Mortgage

Professionals to Watchcolumn

Phone #: (516) 409-5555E-mail: [email protected]


Mel Martinez

Chad Johnson

Indar Ramadhar

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Established in 1993 and headquartered in Waukesha, Wisconsin,Inlanta Mortgage is a multi-state mortgage banking company com-mitted to delivering superior service to our branch clients.For more information, call 262-513-9853 or visit www.inlanta.com.

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Doc Management

DocVelocity is an end-to-end paperless solution designed to sim-plify the loan origination experience. Imagine having all your doc-uments in the loan process as electronic files, all online, from pre-approval to closing. DocVelocity provides: Fast and easy loandelivery to any lender … Automatic doc sorting, naming and filing… Real-time online document sharing for anyone you choose …Friendly and intuitive user interface … No start-up fees, and freetraining and support. DocVelocity addresses important compli-ance issues while giving your office the competitive advantage ofbeing paperless. It streamlines all aspects of the mortgageprocess and most important, it does so in one easy-to-use andinexpensive package. Its newest version, DocVelocity 2.5, addsover 50 new features and enhancements to make the best paper-less office even better. DocVelocity is the flagship product ofPaperless Office Solutions, Inc., a wholly owned subsidiary ofFlagstar Bancorp. Visit www.docvelocity.com to find out more.

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Events

“The Expo for Real Estate Professionals"For ongoing Networking Events throughout the year please visitwww.nycnetworkgroup.com.

NYC Real Estate Expo LLCAnthony Kazazis - Director

[email protected] • www.nycrealestateexpo.com646.210.2545 • 914.763.8008

Hard Money/Private Lending

ACC Mortgage, Inc.932 Hungerford Drive #6 • Rockville, MD 20850

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United Northern Mortgage Bankers......888-600-8808Limited room available for established Team Leaders andLicensed Mortgage Originators. Become part of an established30-year Mortgage Banker with a proven track record and success.

CB Malaga Insurance Services LLC......877-245-5887Insurance broker providing errors & omissions (E&O)insurance to mortgage brokers and bankers. All loan types.Available in 22 states. www.CBspecialty.com

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Title

Wholesale/Residential

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Intracoastal Abstract Co. Inc.................516-358-0505Privately owned & operated full service title insurance agencyin NY, NJ and FL, with affiliates throughout the US & Canada.Escrow Agent in Florida. www.intracoastalabstract.com.

Flagstar Wholesale Lending, a division of Flagstar Bank, is one ofthe nation’s largest wholesale and correspondent mortgagelenders, providing the technology, products, service and supportthat independent mortgage brokers, correspondents, and bankersneed in today’s mortgage arena. In the ever-changing environ-ment of mortgage banking, Flagstar takes pride in accommodat-ing the specific needs of each customer. At Flagstar, we under-stand that you need every available advantage to stay ahead ofthe competition. This is why we provide multiple technologyoptions to meet your needs to register, lock, underwrite, close,fund and deliver your loans. Our wholesale website(wholesale.flagstar.com) and the loan processing tool Loantracprovides our customers with the functionality that make it easierand faster to close loans, saving you time and money! Visit whole-sale.flagstar.com to learn more.

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We offer competitive pricing and fast turn-times for FHA, VA,Conventional, and USDA programs without having a retail pres-ence in the industry. We are a wholesale lender with 22 years ofexperience and believe in exceptional service.

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Regulatory/Compliance

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Sales Coach/Training

At Abacus we make your education count!Nationally approved mortgage education provider - #1400011NMLS Approved Prelicensing and Continuing education coursesNational and State Exam Prep Materials - start studying now!

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Jumbo

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Move your Jumbos to a better neighborhood. ING Mortgage isyour home for Portfolio loans up to $3,000,000. We offer aggressivepricing and simple guidelines in all 50 states. Big Loans. Low Rates. Great Value.

Leads

Our network attract over one million visitors per month. Our paidlead program as well as our free lender directory will help you con-nect with targeted new consumer traffic from with high-intent con-sumers searching online for the right mortgage lender.

MortgageLoan.comSM

www.mortgageloan.com • 877-390-4750MortgageLoan.com is the largest online directory

for mortgage professionals and a favorite of consumers shopping for mortgage loans.

Reach affluent and creditworthy consumers who are in-market andready to transact. Bankrate is a consumer direct Web site, NOT alead aggregator. Qualified leads for every sized budget, and payonly for performance. No set up fees! No contracts! No risk!

• Reach self directed, highly qualified consumers that are activelysearching for mortgage loans• Geo-targeting – reach the right consumers in the right markets• Our proprietary Advertiser Portal gives you complete controlover your campaigns, budgets, and performance reports.• YOU determine your daily/weekly/monthly budget• Pay only for consumers who click on your listing• NO cancellation fees

Try us risk-free! Call 561-630-1257or visit www.bankrate.com/cpcprogram/ for more details.

Internet’s Leading Consumer Mortgage MarketplaceAttracting over 7 million unique

consumers every monthwww.Bankrate.com • 561-630-1257

Loan Incentives

Increase your Loans,Get the Edge & Generate More Referrals!Offer your clients a 5 Day 4 Night Cruise certificate for Two to Mexico,the Bahamas or the Western Caribbean (up to a $1798.00 value) onlywhen they close a loan with you. Only $159.00 per certificate!!

Cruise4Two-Loan Incentives1-866-541-8077

www.Cruise4Two.com

Loan Origination Systems

Calyx Software, the #1 provider of mortgage solutions is dedicatedto offering reliable and affordable software that streamlines, inte-grates and optimizes the loan process. Find out how PointCentralcan streamline your business and create compliant processes today.

Calyx Software 800-362-2599

[email protected] www.calyxsoftware.com

End-to-end LOS system for multi-channel lending.PreQual thru Interim Servicing. Includes all back-office functionality;Underwriting,Secondary Marketing,Post Closing and much moreSaaS, ASP and Client Server delivery options.

Mortgage Builder Software24370 Northwestern Highway, Suite 200

Southfield, MI 48075800-460-5040 • www.mortgagebuilder.com

Loan Management Systems

Xetus ....................................................877-GO-XETUSXetusOne is a powerful, easy-to-use loan management systemthat streamlines loan processing. Our affordable SaaS applicationsare lenders #1 choice for origination, subordination & modification.

Call 888-409-9770 ext 4. to register your company.

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SEPTEMBER 2010Thursday, September 9

Minnesota Mortgage Association 2010Convention & Exhibitor Showcase

Sheraton Bloomington HotelMinneapolis South

7800 Normandale BoulevardBloomington, Minn.

For more information, call (952) 345-3240or visit www.themma.org.

Thursday-Saturday, September 9-11Texas Association of Mortgage Professionals

2010 Annual Convention & Marketplace“All Roads Lead to Texas!”The Hilton Austin Hotel

500 East 4th Street • Austin, TexasFor more information, call (800) 850-8262

or visit www.ttamp.org.

Thursday, September 16Iowa Association of Mortgage Brokers

2010 Annual ConventionWhite Oak Vineyards

15065 Northeast White OakDriveCambridge, IowaFor more information,

call (515) 210-4675 or visit www.iowamortgagebrokers.org.

Sunday-Tuesday, September 19-21Mortgage Bankers Association Mortgage

Operations Conference 2010Gaylord Texan Hotel & Convention Center

1501 Gaylord TrailGrapevine, Texas

For more information, call (800) 793-6222 or visit

www.mortgagebankers.org.

To submit your entry for inclusion in the National Mortgage ProfessionalCalendar of Events, please e-mail the details of your event, along with

contact information, to [email protected].

COMPANY WEB SITE PAGE

Abacus Mortgage Training and Education .......... www.getyoured.com ............................TX3, 17 & 31ACC Mortgage .................................................. www.weapproveloans.com ....................................8BankFinancial .................................................. www.bankfinancial.com ..............................TX2 & 14Calyx Software ................................................ www.calyxsoftware.com ........................................6CAAMP ............................................................ www.mortgageconference.ca ..................................5CB Malaga Insurance Services LLC ...................... www.cbspecialty.com ............................................6Coester Appraisal Group.................................... www.coesterappraisals.com ..................................18Comergence Compliance Monitoring, LLC .......... www.comergencetrustedmember.com ..........19 & 40Flagstar Wholesale Lending .............................. www.wholesale.flagstar.com ....................Back CoverFreedom Mortgage .......................................... www.fmbranch.com ......................Inside Back CoverGateway Mortgage Group, LLC .......................... www.gatewayloan.com ........................................26GSF Mortgage Corporation ................................ www.gsfprobranch.com ........Inside Front Cover & 39Guaranteed Home Mortgage.............................. www.joinguaranteed.com ....................................43iServe Residential Lending, LLC ........................ www.iservecompanies.com ....................................4MBA-NJ/NJAMB ................................................ www.mbanj.com ..................................................45Mortgage Concepts .......................................... www.mortgageconcepts.com ..................................7NAMB/WEST .................................................... www.nambwest.com ......................TX2, TX4, 10 & 42NAPMW .......................................................... www.napmw.org ..................................................23PB Financial Group Corp. .................................. pbfinancialgrp.com ..............................................26Quality Mortgage Services ................................ www.qcmortgage.com ..................................13 & 34REMN (Real Estate Mortgage Network)................ www.remnwholesale.com ......................................9“Seeking Active Mortgage Bank......................................................................................................21Terrace Mortgage Company .............................. www.terracemortgage.com ........................TX1 & 41United Northern Mortgage Bankers Ltd. ............ www.unitednorthern.jobs ............................ 11 & 27Xetus Mortgage Corporation.............................. www.xetus.com ..................................................38

Monday-Wednesday, September 20-22

Second Annual Northeast Conference ofMortgage Brokers

Trump Taj Mahal Casino Resort1000 Boardwalk • Atlantic City, N.J.

For more information, call (973) 379-7447or visit www.mbanj.com.

Tuesday, September 21Illinois Association of Mortgage

Professionals 21st Annual Fall ConferenceMeridian Conference Center

1701 Algonquin RoadRolling Meadows, Ill.

For more information, call (630) 916-7720or visit www.iamp.biz.

Wednesday-Friday, September 22-24Mortgage Bankers Association Quality

Assurance & Underwriting Conference 2010Gaylord Texan Hotel & Convention Center

1501 Gaylord Trail • Grapevine, TexasFor more information, call (800) 793-6222

or visit www.mortgagebankers.org.

Sunday-Tuesday, September 26-28Mortgage Bankers Association Regulatory

Compliance Conference 2010JW Marriott Hotel

1331 Pennsylvania AvenueWashington, D.C.

For more information, call (800) 793-6222or visit www.mortgagebankers.org.

OCTOBER 2010Sunday-Tuesday, October 10-12

National Association of Hispanic Real EstateProfessionals/Asian Real Estate Association

of America 2010 Real Estate Marketing ConferenceThe Bellagio Resort

3600 South Las Vegas BoulevardLas Vegas, Nev.

For more information, call (858) 622-9046or visit www.nahrep.org.

Monday-Tuesday, October 11-12Virginia Association of Mortgage Brokers

22nd Annual ConventionColonial Williamsburg-Williamsburg Lodge

310 South England StreetWilliamsburg, Va.

For more information, call (804) 285-7557or visit www.vamb.org.

Thursday-Friday, October 14-15Kentucky Association of Mortgage

Professionals 2010 Annual ConventionLocation to be determined

For more information, call (270) 929-2836or visit www.kyamp.net.

Tuesday-Wednesday, October 19-20Utah Association of Mortgage Brokers

2010 Annual ExpoLocation to be determined

For more information, call (801) 787-6611or visit www.uamb.org.

Sunday-Wednesday, October 24-27Mortgage Bankers Association

97th Annual Convention & ExpoAtlanta Georgia Congress Center285 Andrew Young International

Boulevard NW • AtlantaFor more information, call (800) 793-6222

or visit www.mortgagebankers.org.

NOVEMBER 2010Monday-Wednesday, November 8-10

Mortgage Bankers of PennsylvaniaConference

Wyndham-Conference Center95 Presidential Circle

Gettysburg, Pa.For more information, call (973) 379-7447

or visit www.mba-pa.org.

Tuesday, November 16Missouri Association of Mortgage

Professionals 17th Annual ConventionSt. Charles Convention Center1 Convention Center Plaza

St. Charles, Mo.For more information, call (314) 909-9747

or visit www.mamb.net.

Wednesday-Friday, November 17-19Mortgage Bankers Association Accounting,

Tax & Finance Management Conference 2010

The Roosevelt New Orleans123 Barrone StreetNew Orleans, La.

For more information, call (800) 793-6222 or visit www.mortgagebankers.org.

DECEMBER 2010Saturday-Monday, December 4-6

NAMB/WEST 2010MGM Grand Las Vegas

3799 Las Vegas Boulevard SouthLas Vegas

For more information, call (703) 342-5900or visit www.namb.org.

FEBRUARY 2011Sunday-Wednesday, February 6-9

Mortgage Bankers Association’s CommercialReal Estate Finance/Multifamily Housing

Convention & Expo 2011Manchester Grand Hyatt San Diego

One Market PlaceSan Diego, Calif.


Tuesday-Friday, February 22-25Mortgage Bankers Association NationalMortgage Servicing Conference & Expo

Gaylord Texan Hotel & Convention Center1501 Gaylord Trail • Grapevine, Texas


APRIL 2011Sunday-Wednesday, April 3-6

2011 National Association of MortgageBrokers 2011 Legislative & Regulatory Conference

Hyatt Regency Washington on Capitol Hill400 New Jersey Avenue NW

Washington, D.C.For more information, call

(703) 342-5900 or visit www.namb.org.

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