Mortgage Industry News

The trade media recently drew attention to a technology “glitch” in the loan origination (LOS) technology most commonly used among mortgage lenders.  According to the article we read, users of this technology encountered RESPA related GFE and TIL data disclosure failures.  Specifically, the entries for the transfer tax and the intangible tax “disappeared,” and due to zero tolerance mandates outlined in RESPA, left mortgage lenders holding the bag for significant monetary losses at closing and/or sale of the loan.

The TIL glitch to which the technology company refers is less clearly detailed, but both problems are being addressed with a service pack work around.

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Lenders, investors and servicers who refuse loan level review at post-closing, pre-purchase, or prior to servicing are risk masochists, or amnesiacs. Earlier this week, I promised to extend the call for a new industry standard loan level review practice to servicers, who need to improve their intelligence on the loans in their keeping prior to accepting emerging risks and liabilities.

This entry was triggered by reading Kate Berry’s March 9th American Banker article, “Foreclosure Talks: Servicers Object to Liability, Compliance Costs in AGs’ Settlement Proposal.”

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Executing loan level review periodically throughout the mortgage lending lifecycle is an industry best practice that must become an industry standard practice.   A couple of recent articles by Kate Berry, a Wall Street Journal reporter we watch closely with respect, inspire me to take to my soap box.

Her Monday, March 7th column “Inspector General Audit of 15 FHA Lenders Finds Problems Run Deep” is a veritable scatch-and-sniff of rubber hitting the road on the case for loan level review, with 15 mortgage lenders facing $23.4 million in potential fines for improperly underwriting FHA-insured loans. Further, the IG’s report rebukes HUD for basically having its eye off the ball and, to my point, failing “to verify independently that loans met FHA requirements and were eligible for insurance.”

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by Ruth Lee

Like an infant growing into adolescence, the mortgage industry in the last five years reached a gawky, unattractive and undeniably destructive period in its development. It certainly looked like an adult, but there was a need for maturity and discipline behind the changing voice. If you’ve ever raised a child to that rebellious stage–from a sweet-faced, kiss and hug bundle of joy to a car-wrecking, school skipping, “truth bending”, beer sneaking teenager–you can see the similarities.

Now, of course, we are going through the discipline (e.g. regulatory compliance, public flogging in the media, and writing “We’ll always conduct thorough loan level due diligence whether we are servicing, selling or buying mortgages” 500 times). Maturity typically follows discipline and it is not surprising that not-for-profits are leading the growth curve. You might even say they are leading by example. Here’s how: Read the full article on our Progress in Lending blog…