Lend America: Lending for the long term

Lend America, Melville, N.Y., a privately-owned, direct-to-consumer residential mortgage lender that focuses on government-insured lending, has partnered with the Rainy Day Foundation, a non-profit organization, in an effort to keep FHA borrowers in homes longer.

Under the new agreement, Lend America will originate the loans and Rainy Day will provide its Homeowner Education and Loan Protection Program (HELP).

I spoke to Michael Ashley, Chief Business Strategist of Lend America, and Rick Delsontro, CEO of the Rainy Day Foundation, about the new program.

According to Delsontro, H.E.L.P ensures borrowers have a clear understanding of the home ownership process, while offering counseling to promote the positive financial behavior, such as savings plans, needed for long-term home ownership. In addition, H.E.L.P will offer borrowers financial protection, including assistance with mortgage payments, should an unexpected financial crisis arise.

Delsontro, who stared Rainy Day in 2003, says that FHA borrowers can get into trouble by the sixth month and delinquencies usually peak and begin to decline by the 24th month.

“Over the past 5 years, we’ve learned that these borrower face some inherent challenges,” said Delstontro. “They don’t come into home ownership with a lot of reserves. It’s not required, so they are one hiccup away from running into problems. And they don’t have great allies. They don’t have anyone who can coach them through certain things.”

Ashley said the alliance with Rainy Day is a perfect fit for his business. Lend America abandoned subprime lending about three years ago because Ashley thought government-insured programs would serve his market better. The company secured the toll free number 1-800-FHA-FIXED and began specializing in the products. But Ashley says he still sees more borrowers getting into trouble.

“We are hearing firsthand, through our telephone hotline, how homeowners are finding themselves overburdened by their mortgage situation and our looking for real solutions that can help them now,” he said.

H.E.L.P. provides one-year job loss protection that provides up to 6 months of mortgage payments, financial crisis protection that provides mortgage payment assistance in a crisis, and a monthly newsletter. Delsontro said that the organization makes monthly calls to the borrower for the first six months to solidify the relationship.

“Many homeowners have little understanding of their current and/or future financial obligations and the first time there is a significant financial setback, there is not enough savings to keep them from experiencing a financial setback,” Delsontro said. “With a preventive initiative such as H.E.L.P., borrowers will better understand the process and financial responsibilities of owning a home and learn the tools to be better prepared to manage the debt associated with home ownership.”

The insurance is underwritten by Rainy Day, but Lend America also pays a fee to be part of the program.

Lenders have counted on community organizations in the past to help first time homeowners get into new homes, mostly through downpayment assistance. Most of the programs designed to get borrowers back out of trouble have been reactive in the past. Ashley says this alliance is a proactive response designed to make borrowers more successful at home ownership. Since FHA is the new subprime, this may be a timely test of the industry's ability to make that happen.

Loan-Score adds New CTO

Loan-Score Decisioning Systems, Irvine, Calif., a provider of automated underwriting solutions to the mortgage industry, has appointed Jon McGuire as chief technology officer. As CTO, he will drive Loan-Score’s development strategy to engineer new products and enhance the company’s solution offering to deliver highly configurable, flexible and scalable solutions that easily integrate with disparate systems using Web services and contemporary architecture design.

McGuire brings more than 10 years of mortgage technology experience to Loan-Score, having served a number of technology and lending firms including ex10sion, Stonecreek Funding, Wilmington Finance and Provantedge Technologies.

McGuire said in a release that he hopes to help build Loan-Score into the "industry’s leading enterprise decisioning and risk mitigation software automation firm."

Wall Street Journal readers will recall yesterday's story about underwriting at Countrywide and the resulting problems. The time is right for a firm to offer a solution that is both flexible enough to allow lenders can get deals done and yet rigorous enough to defeat fraud and mitigate risk. What would that look like? I have some ideas, but I'm looking forward to more discussions with vendors to see what direction they are moving.

MRG forms alliance with Lydian for outsourcing

As the business continues to shift, what have been viewed as traditional mortgage lenders (brokers working for wholesale lenders selling product directly to Wall Street) have given way to what we used to call traditional mortgage lenders back before the S&L crisis. Community banks, savings & loans and credit unions are now finding more home loan prospects asking for service. These borrowers don't have all that many other options in the market today.

Because these new lenders haven't built their operations around the home loan product, many are finding it expedient to outsource some or all of the lending function to third party origination firms that take the application, process the loan and close it in the institution's name.

Dexma has been working in this area for many years under its PrimeAlliance brand. Recently, more companies are getting into this business.

While few companies exist that can take the loan transaction from end-to-end, alliances are making it possible for those firms that specialize in various parts of the deal to come together and form good solutions. A case in point is the recent alliance between MRG Document Technologies, Dallas, and Boca Raton, Fla.-based Lydian Data Services.

According to the companies, their new alliance will provide an end-to-end outsourced mortgage lending solution to any institution that hires them. Specifically, the alliance enables MRG to extend its Miracle document preparation system to customers of Lydian's origination fulfillment center who use Lydian's outsource capabilities to supplement or replace their own internal processes.

Through a new interface, Miracle upfront and interim disclosures as well as closing documentation are available directly from the Lydian Exchange Network, an offering that unites lenders and industry service providers.

We can expect to see more alliances like this in the future, primarily between companies that have been working together on deals for some time. The only difference now is that there is no monoline mortgage banking firm in the middle pulling all of the pieces together. The vendors will have to find ways to come together on their own to provide a more complete solution for institutions that don't have as much experience in the business but that now find themselves with business aplenty.

eLynx Processes over 2 Billion Electronic Docs

eLynx, a portfolio company of American Capital Strategies Ltd. (NASDAQ: ACAS), says its document communications network will have processed, distributed and facilitated collaboration on a total of more than two billion pages of financial services documents by the end of business today. Anyone interested in watching the doc-ometer roll over can surf to the company's website at www.elynx.com.

eLynx provides the most widely used secure electronic document communications network for the financial services industry. The company bought Swiftview in 2006.

eLynx reports that in 2007 alone, more than 12 million secure financial transactions – involving lenders, insurance carriers, agents and consumers – were electronically completed via eLynx document processing services. The firm is already seeing increased activity due to lenders' renewed commitment to electronic mortgage lending.

“eLynx remains committed to providing financial services enterprises with the very best in secure electronic document technology and services,” says Sharon Matthews, eLynx president and CEO. “But our commitment goes beyond that. We're making sure we're working as hard as we can to deliver real world financial performance while making a positive environmental impact. With over two billion secure, paperless documents processed – that's a stack of paper nearly eighty miles high – I think it's safe to say we have a sustainable model for removing paper from our customers’ operations.”

Disclaimer: I was hired to facilitate the company's IdeaWorks Users Conference in February and spent a couple of days with eLynx executives and executives from its Top-10 US banking clients. I was impressed with the company's vision and with the willingness of its top clients to embrace it. When eMortgage's take off this year, this will be one of the companies in the lead.

RealtyTrac: Selling data to RE/MAX

A new consumer foreclosure property search feature has been added to thousands of RE/MAX websites thanks to a new strategic partnership with RealtyTrac. The sites will feature foreclosed properties in Northern Illinois, New Jersey, Kansas, Missouri, Oklahoma, Arkansas, Alabama, Louisiana, Mississippi and Michigan.

Reliance Network, a developer of Web-based applications for real estate companies, is reportedly handling the technology.

RE/MAX is hoping that its agents will be able to capitalize on potentially hundreds of thousands of foreclosures by offering up the properties alongside the company's traditional MLS listings. The company says this will provide a "true 360-degree view of the market."

Moving foreclosed properties, or Real Estate Owned (REO), will be big business over the next few years.

iEmergent: mortgage market forecasts

In an effort to enhance lenders’ marketing efforts, Des Moines-based iEmergent, a market research, forecasting and advisory services firm for the financial services, mortgage and real estate industries, has introduced its suite of Market Manager reports. iEmergent's primary product lines are derived from unique market metrics that calculate where and what types of lending opportunities exist, enabling lenders and brokers to anticipate and forecast mortgage opportunity.

Founder and president Dennis Hedlund says his company’s reports are based on years of advisory work his company has done for major lenders and mortgage data going back into the early 90s. He says that lenders need more information about the markets they hope to compete in and historical analysis will not suffice.

“These are exceptional times,” Hedlund said. “[Markets like] Seattle or Columbus get a terrible rap for low growth and lack of opportunity, but within all of these markets there are opportunities. Lenders need to look underneath their markets. The opportunities are like diamonds everywhere, but it’s not like 2004, when you put out a shingle and someone called you for a refinance.”

Unfortunately, Hedlund says that most lenders are still thinking about the transaction, tactically instead of strategically. During the refi boom, lenders were forced to seek out efficiency. They opened offices where their businesses took them. Now, they are faced with a different environment and must make informed decisions as to how to grow their businesses.

“Many of the institutions I’ve worked with in the past haven’t utilized this level of forecasting, which goes down to the community level,” he said. “They felt that all you needed to know was what happened last year. The problem is that even if you know what happened in the last 3 years it won’t really help you much this year.”

In response to that iEmergent is making available a number of market analysis reports that provide mortgage lending forecasts, market comparisons and measurements. With the reports, financial institutions can identify and quantify the current potential lending opportunities in markets throughout the United States, the growth rates of mortgage lending in the future and how those opportunities are changing in individual markets.

Where is the opportunity in today’s market? Hedlund had some tips: Look to Dallas, Kansas City, Washington D.C. and Chicago.

PMI: Teaching from the Web

PMI Mortgage Insurance Co., a subsidiary of the PMI Group Inc. (NYSE:PMI) , has launched its PMI Training Bootcamp, an online training website for customers to better leverage the Web as a training tool. The site is expected to significantly extend the reach and resources of PMI's training department.

According to the company, PMI can now provide customers with educational information about PMI's products and services, without increasing headcount or incurring the operational costs of trainer fees and travel. Now, the majority of the company's training modules will be delivered online via both webinar and on-demand.

PMI offers residential mortgage insurance and credit enhancement products, financial guaranty insurance, and financial guaranty reinsurance. The products are sold to borrowers by the lender, making it important that loan officers are properly trained to explain the benefits of the products.

"Our industry has changed dramatically in the last year, whether it's changes in GSE loan limits, old customers leaving the market, or new customers being introduced to PMI for the first time," said Jesse Rivera, vice president of marketing for PMI Mortgage Insurance Co. "PMI Training Bootcamp is a fast, efficient way to maintain our existing staffing levels, while continuing to expand training opportunities and grow our customer base."

Neustro Banco: seeking Hispanic banking customers

Nuestro Banco, a new bank set up specifically to serve the growing Hispanic population in North Carolina, has chosen Information Technology, Inc., a unit of Fiserv, to provide its core banking system.

Last year, I wrote about this emerging market for Mortgage Banking magazine. Writing the piece, I learned that this market will grow to comprise 20 percent of our nation in just a few years. I also learned that this population has little respect for traditional US financial services brands. Consequently a number of new banks are rising up in the hopes of serving this market under Spanish language brands. While Nuestro Banco (Our Bank) may not be the most creative name, it could work to attract these consumers if it keeps their needs in mind. With the Hispanic population growing rapidly in the state, it is a good opportunity.

A release issued by the two companies indicated that the bank would use ITI's Premier software suite, which offers highly scalable products for virtually every function, including core accounting, branch and Internet banking, business intelligence, risk and compliance, remote capture and transaction management, enterprise business process and content management.

“The Hispanic population is growing at 20 percent per year in North Carolina,” said David Flores, president and chief executive officer of Nuestro Banco, “and the group’s purchasing power is actually growing faster than the population growth rate. The Census Bureau estimates that by 2050, one fourth of the nation’s population will be of Hispanic origin, yet today, the Latino populace as a whole is severely underbanked.”

Flores said the key to capturing this business will be to design new ways to bank – ways that accommodate the Hispanic culture, habits and way of thinking. "We understand these factors, and so does Fiserv," he said.

Unfortunately, a key aspect of Hispanic culture is that they don't typically use banks. Nuestro Banco apparently hopes to change that by working with "a software partner who not only understood the dynamics of the Hispanic banking market as it stands today, but one who could see the long-term direction the financial industry will take in response to its expansion."

Fiserv ITI will leverage its Spanish-language Internet and telephone banking software for its new client, as well as its popular Hispanic Banking Toolkit, a tool that the company claims provides insight into cultural differences and common barriers to banking for Hispanics.

I've written a lot about Fiserv over the years and I think highly of their engineering staff. Their software is widely used, both in banking and mortgage. But the key to serving the Hispanic population probably has little to do with innovative new banking products. They view banking services pretty much the same way the rest of us do, as commodities.

They key will be in creating a community that builds trust among members of a market that have traditionally been cheated at worst and ignored at best. The tools exist to do this and I personally believe that it is likely to be a bank serving a niche that first makes good use of them. It could be Neustro Banco, in which case they'll be happy they have a good core processing system to handle all the new business.

MRG: compliance related updates

MRG Document Technologies, Dallas, has enhanced its Miracle Online doc prep system with an eye toward compliance. The company has updated the software to meet specific regulations for a couple of states.

In California, MRG now provides a completed document to satisfy the California Department of Corporations' requirement to supply a Nontraditional Lending Disclosure when a loan is considered a nontraditional product. When the property is located in California and the selected product is either an interest-only or option/negative amortization adjusted rate mortgage, a new screen titled “CA additional programs" is available for users to select up to ten additional loan programs offered by the lender.

Additional programs are used to calculate values that populate the disclosure included in the document package. MRG's system calculates results using the lender's products and terms as specified in MIRACLE and as required by the regulation. The document is not static and does not include predetermined products and calculations.

In Maine, MIRACLE now includes a screen for completion of the Maine Reasonable, Net Tangible Benefit Disclosure. For refinance transactions in Maine, lenders can complete the disclosure on the “related lien” screen.

“As states announce new lending regulations to reflect current market conditions, MRG’s systems continue to evolve,” said Terry King, group Chairman of MRG. “MRG understands that mortgage brokers and lenders require customizable tools that fit their current loan products and comply with state requirements and borrowers' needs, and we provide a flexible system to meet those requirements.”

Most mid-tier lenders have fallen back on the document vendors to provide built-in compliance services, though many competitors don't have internal compliance attorneys on staff. This is an area of high concern for lenders in an environment of increased scrutiny, overlapping jurisdictions and additional legal complexity. (I could have just said "scariest environment possible" I guess).

MRG is the mortgage document practice group within Middleberg Riddle & Gianna, a mortgage regulatory law firm.