Mortgage Industry News

An article in Mortgage Servicing News entitled Housing Finance System Future is Wide Open written by Brian Collins quotes Treasury Secretary Timothy Geithner “as blaming the GSEs’ large investment portfolios for the substantial losses on the inherited commitments of two, saying FNMA and FHLMC failed to charge appropriate guarantee fees on low quality loans.”  I would argue that once again the real issue has been missed.

Encouraging the collection of more fees to shore up “guarantees” is not going to fix the problem or prevent what has happened over the last couple of years from happening again.  The real issue is not that appropriate guarantee fees were not charged.  While this may have stemmed some of the bloodletting, it does not fix the real problem.  Quality loan production tiering from loan origination through purchase is the real issue.  Charging more fees just drives up the cost to produce mortgages, which ultimately has taxpayers eating it coming and going.  Haven’t we already eaten our portion of this dog’s breakfast?

The REAL Solutionis to not buy the loans in the first place if quality production cannot be demonstrated prior to purchase.  No more exceptions or backroom deals based on volume submission allowed.  The days are numbered for direct seller/servicers who deliver Notes for purchase knowing the mortgage produced wasn’t done in accordance with good lending practices.  The winds of change are a blowing… slowly, but surely.  The new FNMA Loan Quality Initiative set to go into effect June 1st is the first step in the right direction, but there is so much more that can be done.

Have I mentioned standardization?   

Ruth Lee

Efficiency, Relevant Regulation, Cost Mitigation, Investor Confidence: A Vision for Rehabilitating the Housing Industry

Despite the valuable attention being paid to toxic assets and foreclosures, there is a greater issue threatening the long term health of the financial services industry – the loss of investor confidence. As banks struggle for capital on Wall Street, we have an opportunity to lay the foundation for the return of investor confidence using readily available technology to open up the mortgage process, provide inherent accountability and complete transparency.

Cerberyx/Titan Process Management – Quality production does not require any further technology development or intricate training challenges, rather a return to sound business practices leveraging existing technology. Currently, there is little true transparency in loan origination and much of the operational standards are developed at the investor (or secondary) level leading to inconsistency and a lack of sound metrics to establish product reliability and performance across entire channels. Once the loan is closed and funded, it isn’t about addressing the source rather the consequences of inaction during origination. We must develop a regulatory structure for operations that is relevant, cost effective and efficient. Titan has designed a salient operational structure that doesn’t respond solely to origination (volume) but to investor needs and requirements for future investment, using accountability and transparency rather than “gaming” due diligence.

Democratization of Technology: Technologically, the industry is actually very advanced on a granular level. However, the lack of overall industry standardization eliminates the participation of most independent mortgage brokers without access to enterprise class software. Origination has proven to be the “tip of the spear” in loan performance and without buy-in and participation from all origination channels there is little hope for evolving the industry to meet current needs. Two short examples:

• Bar coding documents – a simple, nominal cost solution to parsing the significant paperwork in mortgage lending with lenders, regulators, GSEs and servicers. The technology is available throughout the industry, but with no standardization it is useless to the primary market where it needs to be employed.
• E-vaulting – The industry needs a credible, secure custodial electronic “vault” for warehousing digital mortgage notes to ever evolve digital viability in mortgage lending. Eliminating transportation, custodial fees and costs, lost notes, paring turn times from funding to purchase on the secondary, allowing participation from investors to servicers to local recording offices.

Titan is concerned that attention is only being paid to Wall Street/ mega-lender concerns and consideration of operational best practices is once again being left as a “what can I get away with” value proposition. As an industry, we have never seen a better time to redefine and clarify the operational role in producing investor confidence. With the GSEs under conservatorship, there is a timely opportunity for taking the lead in establishing industry operational (not only product) guidelines, disseminating efficiency through technology and culling out irrelevant regulatory protocols.

If we are going to redefine an entire industry, Titan implores that attention is not only paid to “predators,” almost all of which are out of business, but to the core issue of investor confidence through sound production.