Thursday, August 30, 2012

Compliance webinars enjoying good attendance

It's always nice to know the rules of the game before the first play. Sadly, that's not always possible. In our own industry, we find rule makers seemingly making them up as they go. Often, we learn about the penalties for breaking the law before we find out what the law actually is. This tends to produce a fair amount of unease.

To combat feelings of helplessness, many industry participants are turning to webinars in the hope of getting the very latest compliance information. According to executives at Mortgage Cadence, a provider of Enterprise Lending Solutions (ELS), Document Services, Compliance and Default Servicing Technology for the financial services industry, a webinar it recently hosted attracted 275 participants.

The program's topic was the Consumer Financial Protection Bureau’s proposed, sweeping changes to mortgage disclosures.

“Lenders have to stay informed on today’s constantly and broadly changing regulations,” said CEO of Mortgage Cadence, Mike Detwiler. “We take our commitment to educating our customer and ensuring their compliance very seriously."

The CFPB proposes to replace the Truth in Lending Disclosure and The Good Faith Estimate with the Loan Estimate Disclosure. Additionally, the Bureau plans to combine the final Truth in Lending and the HUD-1 Settlement Statement into a new Closing Disclosure.

“These proposals, borne of Dodd-Frank in an effort to help consumers better understand the debt that finances their home, are the most significant changes that the mortgage lending industry has faced in decades,” said Chief Legal Officer at Mortgage Cadence, John Levonick.

Levonick hosted the session and was joined by Richard Andreano, a partner at Ballard Spahr and noted RESPA expert. The recorded version of the seminar is available online.

Mortgage Cadence will host another webinar on this subject as the proposed regulations unfold. “Our team of mortgage, technology and compliance experts is the best in the industry,” said Detwiler. “Their expertise is focused on helping our customers address these changes in the simplest, most straightforward and compliant manner."

Thursday, August 16, 2012

Mortgage Cadence releases new ELS

It should come as no surprise to anyone who reads my stuff regularly that I like Mortgage Cadence. I like the way the company is run and I like the vision. I'm also very impressed with how smoothly the company transitioned from an elephant-hunting purveyor of heavy metal enterprise lending systems to a  marketer of pre-configured systems and standalone components, like its Finale document system.

With the purchase of Prime Alliance, the company's transition was complete. It expanded its scope from selling very expensive loan origination technology to the nation's largest lenders to include selling software to the nation's smallest originators. And now, just a few weeks after the announcement of the sale, the company has released its new product for credit unions, prime+ 12.1.

The new service will installed for all Prime Alliance customers on August 21, 2012. This release offers loan officers and production teams 45 new tools and alerts designed to increase efficiency, enhance communication, and speed loan closings.

According to the company, prime+ 12.1 benefits the entire mortgage team. The idea is simple: automate notifications throughout the mortgage process that prompt action and alert team members and borrowers to important changes and events impacting the lending lifecycle.

“Staying on top of every detail has always been important during loan origination but is now essential due to ever-increasing regulations, which have created stricter compliance standards. This release provides tools that keep everyone informed, help speed processes, and ease compliance burdens,” said Dan Green, executive vice president of marketing, Mortgage Cadence.

“With the complete prime+ mortgage platform, which facilitates mortgage lending from origination through closing and funding, Mortgage Cadence offers the most complete and advanced suite of products in the lending technology industry,” said CEO of Mortgage Cadence, Mike Detwiler. “Our acquisition of Prime Alliance Solutions and the remarkable systems they have built over more than a decade puts our customers years ahead. The time is now for all credit unions to build and execute sustainable mortgage lending strategies. There simply isn’t time to wait for technology to catch up", he stated.

Mortgage Cadence’s next release of prime+ is scheduled for December with version 12.2.

Tuesday, August 14, 2012

Default Business Not Slowing

The industry trades reported today that foreclosure pipelines in states across the country are growing again, even in the wake of some states' efforts to slow them down. This is causing some default servicers and third-party service providers to add staff. Recently, WFG Default Services Group, Simi Valley, Calif., added two new executives.

The company has hired industry veterans Steven Dunsmore and Dean Kirchen to manage its default services group. The Williston Financial Group family is a full service provider of title insurance and real estate settlement services for lender, commercial and residential transactions nationwide.

Dunsmore will serve as Senior Vice President, Title Operations Manager-Default Services for both WFG National Title and WFG Title Insurance Company. In that role, he will work with Kirchen to oversee the day to day operations and development of the group’s default services operation. He comes to WFG National Title over 30 years of industry experience, 29 of which were spent as Senior Vice President with one of the nation’s largest title underwriters. He has extensive experience with default and REO title services. He is also an active member of the California Land Title Association.

Kirchen will take the role of Senior Vice President, Title Operations Manager-Default Services. He will work with Dunsmore to manage the daily operations and strategic development of WFG National Title’s default services group. He brings to WFG National Title over 26 years of title industry experience, having spent the majority of that time with one of the nation’s leading underwriters. During that time, he helped create the infrastructure and procedures still being used by that underwriter to process foreclosure title related products throughout California. Kirchen graduated from Marshall School of Business at the University of Southern California where he received a Bachelor of Science degree in Finance and Business Economics.

“WFG’s clients are increasingly seeking a centralized provider of default services able to manage large orders while maintaining quality and attention to detail,” said Donald O’Neill, WFG National Title EVP of Institutional Services. “Steve and Dean are highly regarded throughout the industry for their experience and expertise delivering top quality default services. Both are extremely customer-focused, and we are confident our existing and new clients will benefit from their knowledge and background.”

Friday, August 10, 2012

Talking the Talk in Real Estate

Those of you who know me, or have been reading this blog for any length of time, know that I spend most of my time writing about and working for folks who work in the mortgage technology niche. It's a pretty narrow niche populated by some very interesting people. It has been a joy working here and I hope to continue for some time.

Lately, I've been working on spreading out a bit and writing about some other parts of the business. Writing about the real estate business was not much of a stretch as I am a former editor of Real Estate Technology Insight, an October Research publication that has since been put to sleep.

The good folks over at the Niche Report Real Estate have been kind enough to let me write for them from time to time, and I blogged about a recent piece I'd penned for them over on our business blog a couple of weeks back.

At that time, I was approached one of the guys from the Movoto Blog. They appreciated my comments on using Facebook for Real Estate and directed me to one of their recent blog posts entitled "How to Read: Real Estate Adverts Edition." Being a communications guy, I appreciated the post. I think you might to, so give it a look.

I want to thank Nick Johnson for reaching out to me and encourage any of you to do the same, either in the comments or via e-mail.

Thursday, August 02, 2012

The Only Way to Counter the CFPB

originally written for the Real Estate Mortgage Executive Newsletter (REME), July 2012
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When lawmaking changed from a part-time pursuit for a few rich white men who didn’t really like laws into a full-time career, our government changed with it. This was no unintended consequence, unforeseen by the Founding Fathers. They knew full well this risk existed. That’s why they drafted a Constitution that attempted to guarantee personal liberty by putting limitations on government instead of attempting to protect a long list of explicit freedoms.

Big government is scary. I’m certainly not the first person to say so. In our lifetimes we have seen big governments in Soviet Russia, Cuba, Vietnam, Iraq, and China. We watch in shock as China controls every aspect of the lives of its people. We can’t believe that religious regimes like those in the Middle East enforce laws that turn their women into chattel. We shake our heads, while behind us, our own government is very busy, creating long lists of the things we are allowed to do and the things we are not.

Of course, it’s all for our own good, we are told. The government is only protecting us from the threat of big business.

Forget for a moment that “big” was a virtue not that long ago, during the days of “too big to fail,” and focus instead on the government’s role as self-appointed chief protector of the consumer in a financial transaction. It would take a global economic meltdown to convince the American public that the federal government needed to have a seat at the closing table for every conceivable financial transaction. Of course, that’s pretty much what we saw in 2007. And now, we have the Consumer Financial Protection Bureau.

Technically part of the Federal Reserve System, the CFPB is now the primary rulemaking body for all things that impact American consumers’ financial lives. The Bureau has been tasked with carrying out the letter of the Dodd-Frank Wall Street Reform and Consumer Protection Act as part of the Fed. It is a body that has proclaimed itself independent within the government with the power to make decisions that do not have to be approved by the president or any member of the executive or legislative branches of government. It will write the new rules and then enforce them, and there is little the U.S. financial services industry can do about it. Or is there?

The industry has exactly one hope of influencing this rulemaking body and it doesn’t have anything to do with anyone now working at the CFPB or likely to do so. Our only hope is to win over the hearts and minds of the American public in an effort to expose the CFPB for what it truly is, government growing out of control, a cancer spreading through our country in a mindless quest to gain more control, secure larger budgets and hold onto its power.

It could work. People hate big government. It scares them and rightfully so. People are fed up, and the only thing that has ever stopped tyranny is the application of the combined hearts and minds of a people fed up. And they’re close. A Gallup poll recently (within the last six months or so) found that 64% of people surveyed said big government was the biggest threat to the country, compared to just 26% who said big business is their gravest concern and 8% who picked big labor.

It might only take a spark to get the American public to force Congress to overturn Dodd-Frank and dispel the CFPB forever! The only problem is that the CFPB might actually be doing some good for the American consumer--it’s working day and night to win over their hearts and minds and reminds them on a daily basis why they hate us. They come across as being squarely on the side of the consumer and ready to protect them from the threat of an industry that they see as an evil empire. We could also add that the CFPB has the power to put an industry player out of business with a pen stroke, but why make things more difficult than they have to be?

So what should the industry be doing now? Three things. First, realize that we are at a turning point and that once firmly in place, the CFPB will be as difficult to dislodge as the Fed, HUD, Freddie, Fannie or any other quasi-government institution. The time to act is now. Second, accept the fact that the government is not your friend. Time spent on Capitol Hill will be wasted if you don’t find a way to win over the hearts and minds of the American consumer. Third, this is a race. Either we win over the consumer now or the government does, and there’s only one way to win it.

There is a classic story about the French Revolution in which Marie Antoinette, when informed that an angry crowd of French peasants were rioting just outside the walls for lack of bread, looked down her nose and suggested they simply eat cake instead. Who knows if it really happened, but what a great way to illustrate how completely out of touch these leaders were. Every crisis spawns its own stories. Today, we have the stories about the Wall Street guys laughing in e-mail about the crap they’re selling, the bankers on trial for pushing minorities into subprime loans when they qualified for agency paper, and servicers telling their sub-servicers to lose the paperwork on loan mods to slow down the process. Is it any wonder so many Americans are searching eBay for used guillotines.

So the question is, do we have to quit making a profit on our deals? Of course you don’t have to turn your business into a non-profit in order to win back the customer. People expect you to make a profit. They know you have expenses, especially those consumers who own a business or belong to labor unions. It’s okay to make money in America, as long as it’s an exchange of services. Ponzi schemes, fraud, theft, negotiating in bad faith--these don’t float.

You and I were not engaging in that type of evil during the downturn, but it doesn’t matter. The first thing you have to realize is that if this industry doesn’t win back the consumer, the government will win by default and then rewrite all of the industry rules and turn your company into a non-profit. Count on it. This is a game of perception and the winner will make the rules going forward. Worse, this is a game of consumer perception, which is much different than the old game of winning over a few politicians and SEC boys. That game was easy. This one isn’t.

If we want to win this game, we’re going to have to convince the American home loan borrower that we’re in it to serve them, which means we’re going to have to show that they are better off after they get their new loan than they were before they signed on our dotted lines.

This is not a new concept. The industry has been pushing hard against this for some time. While proving that the borrower will be in a better financial condition after the loan may be challenging, CFPB seems to feel that making sure the borrower can repay the loan is a step in the right direction. Even now, the bureau is working on its definition of the “qualified mortgage,” which is expected to include elements designed to assess the borrower’s actual ability to repay the loan.

But the industry already has tools available that can tell quite easily whether a borrower will have more money left at the end of the pay period after the new loan is written. One, according to Garth Graham, founder of Financial Literacy Solutions, is the good old household budget. You know, the one that uses numbers like net pay and actual living expenses. Much different from the gross pay and basic ratios used in most loan underwriting.

Another tool is provided by Greenbar Mortgage. It’s basically a spreadsheet program that LOs can use to enter consumer information and then know what the borrower’s resulting financial condition will be under a number of loan scenarios.

Regardless of how the industry does it, step one is to begin acting like the job is helping people reach financial goals and not just selling financial instruments. The former has the potential to convince consumers that we provide a service more valuable to them than what big government provides. The latter will put us right back into trouble.

Once we accept the fact that our industry must do more than sell financial instruments to be successful, we need to get that word out. But to whom? Some may rush to Capitol Hill in an attempt to convince the government that we’re the good guys now and they can quit working on the hundreds of new rules that will be the legacy of Dodd-Frank and go back to doing whatever it was before the economy hit the skids. That’s a waste of time.

The federal government is like a snowball rolling down a winter hill. It grows bigger, never smaller. Pulling the CFPB back now would be like trying to catch a bullet and stuff it back down the barrel of a sniper’s rifle. It never, ever happens. In a few years, some political action committee may grow large enough in the face of the many future unintended consequences of Dodd-Frank to get the law repealed. But all of your businesses will be dead by then.

No, the government is not the target. The people you need to impress and the only people who will ever be in a position to help our industry are the consumers. You must respond to all requests from the CFPB and other regulators, but expect them to twist anything you tell them into the message most likely to preserve the importance of their mandate and, by extension, their own importance. It is the way of government agencies.

Finally, once we realize that our business really is all about the consumer, we need to realize that the federal government has already arrived at this conclusion. The consumer was the first target public of the CFPB. To this day, their websites are all geared at harvesting information from consumers, with a clear preference for negative information. Whether we like it or not, we’re in a race, the consumer is the prize, and everything is at stake.

Winning over the consumer will require the industry to provide a real service to them (not just sell into the naturally greedy nature like a casino), teach them how to be financially literate, learn to speak the borrower’s language, and then relentlessly tell them success stories about other borrowers just like them and encourage them to tell their own success stories. In short, the industry had better figure out PR and social media so satisfied customers can share their experiences.

It’s the kind of work that can take years, and one greedy Wall Street firm can tear it all down again. The industry may not have the patience for it, but the government does. Bureaucrats have been known to work quietly behind the scenes for years to solidify their power bases. Believe me, they’re in it for the long haul.

After a financial crash the likes of the one Americans have lived through over the past half decade, it’s probably not realistic to believe that our industry can make consumers like us. But it should be possible to get them to like us more than the government. If we can do that, we’ll shortly be back in control of Americans’ financial lives.

If we don’t, our industry will become a puppet of the U.S. government, making loans to anyone the government decides should get one and acting more like postal workers making their deliveries than independent businesspeople delivering products and services. If that doesn’t scare you, practice repeating this: “Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.”

Let’s hope it doesn’t come to that, but remember that hoping won’t be enough to stop it. 

Wednesday, August 01, 2012

Living Large in NYC...for now.

My friend Keith Jurow sent me some interesting data the other day. Jurow is a housing market analyst and real estate expert who authors the Housing Market Report for Minyanville. A former senior economic writer for Holt Investment Advisory of Westport, Connecticut, Jurow is a graduate of Cornell University, received an M.A. and Ph.D. from the New School in Manhattan, and taught on the undergraduate level for more than a decade. He writes:

"I just received the updated second quarter serious delinquency stats...truly scary. More than 400,000 seriously delinquent owner-occupied properties just in NYC and Long Island. Almost none of them have been put into foreclosure. Sooner or later, the banks have to start acting on them. When they do, home prices collapse throughout the NYC metro area -- 19 million people. I am as certain of that as I am that the sun will rise tomorrow morning."

Jurow sent me a table showing the cumulative totals through June of serious delinquent owner-occupants in NYC and Long Island who received pre-foreclosure notices from their mortgage servicer. A 2009 New York state statute requires all mortgage servicers to send these notices to all owner-occupant borrowers who are delinquent more than 30 days on their mortgage. The law requires that servicers send a “pre-foreclosure notice” at least 90 days before the servicing bank may commence any foreclosure proceedings. The act does not require notices to be sent to investor-owned properties nor for properties known to be vacant.

The table won't fit nicely into this blog post, but I'll put anyone who would like to see if in touch with Jurow. I found particularly interesting the number of statewide delinquencies that fall within the seven counties surrounding NYC (Bronx, Kings, Nassau, New York, Queens, Richmond and Suffolk) compared to the rest of the state as a whole. Over 53% of all foreclosure notices issued in thge country went to homeowners in one of those seven counties, accounting for 405,156 out of 754,923 notices issued statewide.

If Keith is right, this is a very scary situation that banks in and around New York City are being very quiet about. I asked him about the likelihood that these delinquencies would cure.

"I have posted charts in my articles which show that after a property goes delinquent more than 60 days, 95% of them will not become current again. This means that some action against the borrower will have to be taken at some point in the future," Jurow said. "The only real exception is those delinquent owners who receive some kind of mortgage modification. But we have very good data from OCC and Hope Now which show that over 50% of all mortgages that were modified have become delinquent again."

Jurow says that his data indicate that over 30% of all first liens in NYC and Long Island are now seriously delinquent yet have not entered foreclosure.

"For two years, I've been saying that the banks can't keep extending and pretending indefinitely. Once they start to take some action -- either foreclosure or a short sale -- prices in the entire NYC metro area will collapse."