Mortgage Industry News

Ruth Lee

As reported in the June 18 issue of Origination News (subscribers can read the entire article at: http://goo.gl/3lHSo)

“There are those lenders who are stepping up and looking to expand. One of those is Titan client Alpine Mortgage LLC of Bedford, N.H. Managing partner Scott Reid detailed some of the issues in the firm’s conversion from a mortgage broker to a mortgage banker, which took place in April 2010. The company is also adding offices in New  England.
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Ruth Lee

As was attributed to me in the June 18 issue of Origination News:
(subscribers can read the entire article at: http://goo.gl/3lHSo)

“Titan’s Kladde declared that sales and operations need to be ‘symbiotic.’ The sales staff needs to realize that if you don’t produce quality loans, the repurchase risk could put the company out of business.

At the same time, operations find a way to get the deal done efficiently and quickly, without stifling sales, she said. Some organizations are so operations-oriented that it restricts sales activities; those businesses can’t survive, Kladde said.

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As was attributed to me in the June 18 issue of Origination News, I believe “some of the problems of the past few years are a result of not putting ‘our best and most experienced people in the back office.’”

by: Cindy Breternitz

It makes me so sad…

Today I had a long discussion with one of our customers in Florida, a soon to be ex-customer and ex-mortgage banker.   This is a good man, a smart man, with over 30 years in the industry, and sadly, his end wasn’t from a dip in rates or a swing in the market but from the losses he took in his first year as a correspondent lender.  He is leaving the industry; and that is the industry’s loss.

As we all know there is no handbook for becoming a correspondent lender, no proven training you can attend to educate yourself on the business of managing warehouse lines, investors, or best business practices for your internal staff.  By the time our client recognized he didn’t know what he needed to and found us, it was too late.  The damage had been done and the debt from errors and restitution overwhelmed his company.

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OCC Deputy Comptroller, Credit and Market Risk David Wilson’s testimony before the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection last week (http://1.usa.gov/imejFD) is a primer on the “tornado” that we described in the June issue of Mortgage Technology.

Although generally even-handed, Wilson’s testimony retains a flavor of blame with regard to third-party originators and brokers that begs reading between the lines, especially by LOs facing life-altering career decisions.

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Currently, borrowers who take out FHA-insured mortgages put down as little as 3.5%, which in the general market retreat from High LTV products, has increased FHA market share from sub-7% to over 30% in a short three years.  However, already there are Republican proposals that would require FHA borrowers to increase their “skin in the game” to a 5% down payment.  The rationale is based on concerns that as defaults rose during the worst of the housing market implosion, FHA’s cash reserves dwindled, and telegraphing major concerns that taxpayers would have to come to the agency’s rescue.

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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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Response to full article from DailyFinance: http://srph.it/gx6d7V

We have been staying abreast of the MERS issue and the broad challenges to their raison d’être for a while.  MERS is a tool… and like any other tool, it is at the mercy of its users.  There is no doubt that MERS members were executing the MERS system badly, but somewhere along the line the idea to blame the tool rather than those that used the tool badly evolved.   We fear that in the confusion and hysteria surrounding the state of foreclosures in the mortgage industry that blame is being laid at the feet of the pen rather than the writer.  This is like blaming a calculator for incorrectly calculating addition when it is the bank that entered the figures incorrectly.  If this course continues, the industry will be forced to abandon a critical tool which is vital to the reestablishment of a private securitization market.

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As I was saying earlier, “Outsourcing payroll and other human resource operations to textile manufacturers is a suitable metaphor for why many mortgage bankers and community bank mortgage benefit from outsourcing their mission critical, but non-core, areas of operation.  Specifically, I am thinking about mortgage fulfillment operations, where detail orientation and scalability must co-exist.”

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Earlier this week, I heard about how Automatic Data Processing (ADP) came to be a leading global business-to-business outsourcing firm today valued at $9 billion.

In 1949, in a New Jersey textile manufacturing region, textile mill accountant Henry Taub realized the burden payroll represented to manufacturers.  Payroll was mission critical to the mills, but their work had nothing at all to do with payroll per se. Textile mills employed a lot of people, and by that era employees were unionized, so payroll was subject to scrutiny and enforcement by Federal regulation.

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Guest Post by Ian Wright, Community Trust Bank

Last week I attended the MBA’s National Policy Conference – my favorite MBA event of the year.

Heading home, I tweeted about what a great event it was.  Later that day I got an email from a friend asking me “What was the most interesting take away from the conference?”  That got me thinking – the MBA had 4 specific talking points that made up a bulk of the agenda. That wasn’t my top take away.  As I listened to the speakers and read over the literature, one theme kept coming back at me, Dodd-Frank.

We have been hearing about Dodd-Frank for months.  How complicated it’s going to be to implement, the number of agencies affected by the rule changes, we’ve heard it all.

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Earlier this week some team members and I were discussing Dodd-Frank’s “Too Big Too Fail”(2Big2Fail) aspects.  This is a favorite topic because 2Big2Fail is such a singular (e.g. “BIG FAT UNDENIABLE”) example of what happens when laws are passed in a political panic response.  And it isn’t pretty.

I’d been debating all week whether the strong language of our discussion should reach the tender ears of our readers. Then, just this morning, the Wall Street Journal featured an article, “Dodd-Frank’s Threat to Financial Stability.” American Enterprise Institute senior fellow Peter J. Wallison speaks with clarity when he writes “The identification of firms as too big to fail is a MAD [emphasis added by blogster] policy: It will signal to the world, removing all doubt, that the government will take steps to prevent the failure of these firms, giving them advantages in the marketplace.”

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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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