Professional Documents
Culture Documents
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P R E S O R T E D S T A N D A R D
U . S . P O S T A G E P A I D
N M P M E D I A C O R P .
N M P M E D I A C O R P .
1 2 2 0 W A N T A G H A V E N U E
W A N T A G H , N E W Y O R K 1 1 7 9 3
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THE
MORTGAGE
PROFESSIONAL
TRUSTED
By Greg Schroeder
Trust is imperative in todays lending environment. However,
the adage trust but verify promises to dictate the relationship
between third-party originators and their wholesale lenders.
Brokers need to understand and adapt to the conditions that
define this all-important relationship, not by becoming passive,
but by becoming better informed.
With consumer confidence at an ebb and investors in a state of extreme cau-
tion, and in consideration of the U.S. Department of Housing & Urban
Developments (HUDs) recent memo regarding third-party originator (TPO)
due diligence and management, the onus is on wholesale mortgage bankers to
verify beyond a shadow of a doubt their TPO/broker partners trustworthiness.
It follows, then, that to achieve a competitive advantage and enhance their over-
all appeal as a mortgage lending partner, brokers need to be acutely aware of the
criteria wholesalers are using to evaluate potential TPO partners. They must
also be prepared to negotiate additional consideration when the criteria used
gives an incomplete or misleading picture.
When determining whether a mortgage professional (i.e. a broker) should, in
fact, be trusted, there are several areas of that professionals background that
wholesale lenders typically investigate. Among the most obvious and telling are
the brokers licensing status and loan performance history.
Thanks to the SAFE Act and the creation of the Nationwide Mortgage
Licensing System (NMLS), mortgage broker licensing is now the norm rather
than the exception. However, everyone knows that a brokers licensing status can
change in the blink of an eye. Many lenders are adopting a policy of conducting
ongoing checks of brokers license status, knowing that a spotty licensing histo-
ry could signify big trouble.
Additionally, wholesalers are zeroing in on brokers loan performance histo-
ry. Granted, given the tsunami of foreclosures resulting from the current finan-
cial crisis, a couple of blemishes on an otherwise pristine record will not neces-
sarily tank a potential relationship. However, a history of loans with high EPDs,
FPDs or fraud is a clear indicator to wholesalers that a broker should not be
admitted to their list of trusted mortgage professionals. Therefore, brokers
should be especially diligent in executing advanced quality control protocols on
their loans to weed out the bad loans.
Okay, verifying licenses is reasonable and tracking loan performance makes
sense, but what about personal credit history? Should brokers be surprised that
some wholesale mortgage bankers view their personal credit problems as a huge
red flag? Maybe yes, maybe no. The point is that wholesale lenders are under
pressure on several fronts (investors and regulators are particularly inquisitive
about wholesalers broker relationships) to thoroughly vet and err on the side of
caution when considering a broker relationship. A credit report is a treasure
trove of insight, to be certain. There is common sense in the notion that a debt-
burdened broker is at greater risk than a financially-stable broker, especially if
evidence of the debt burden co-exists with recent loan problems. However,
counterintuitive as it may sound, basing a partnership decision on a brokers
personal credit history alone could be bad businessfor the lender. It is impor-
tant that brokers understand the wholesalers need to know as much as possible,
but in the event a broker believes their credit report is working against them, it
is advisable to respond proactively with a well-articulated explanation.
Of all the mortgage industry, brokers have been, without a doubt, the most
adversely affected personally by the sub-prime meltdown. Both from within and
outside of the industry, experts, critics, politicians and the media have all been
eager to deposit blame primarily on brokers shoulders for a systemic failure. As
Trust But Verify: Understanding the
Wholesale Lender Mindset on Broker Credit
continued on page 12
Federal laws now require every covered
business to have a compliant system in
place at all times. Covered business includes
mortgage brokers and lenders. Mortgage
originators are also required by law to have
compliant systems for the origination of
mortgage loans. When I started my business
15 years ago, I began a mis-
sion of defining and using a
Compliant System. This has
resulted in the establishment
of my companys Business
Operating Principals. One of
the main principals is the
Principals of Compliance.
Principals of
Compliance
According to the many con-
sumer protection laws, a
compliant operation has a
system in place to document
and apply the following:
1. Safe handling of all
documents;
2. Well-documented com-
munications between
all parties;
3. Safe handling of all
electronic documents,
e-mails, faxing and
texts received and sent;
4. Well-documented poli-
cies and procedures;
5. Generally Accepted Accounting
Principles (GAAP)-compliant finan-
cial controls;
6. Training and oversight of opera-
tions; and
7. A Red Flags procedure.
Every mortgage broker or lender
business in the country must do some-
thing about implementing such a sys-
tem. I would like to establish a starting
point by which a small company would
embark on such a mission.
According to federal laws, every
mortgage originator has a legal
responsibility to deter, detect and
defend the information of every per-
son they serve. This requires compa-
nies to closely follow all relevant laws
covering the operation of their busi-
ness. At this time, excluding individ-
ual state laws, there are about 75
major federal laws and regulations
that govern some aspect of the mort-
gage origination business.
The following laws required
increased compliance for businesses
that have access to non-public person-
al information:
USA Patriot Act
(USAPA) 2001
The Patriot Act requires
every company to identi-
fy, through appropriate
documentation, the actu-
al identity of a person.
SAFE Mortgage
Licensing Act
2008
The SAFE Act mandates
that all states enact laws
governing the qualifica-
tions and licensing of all
state-licensed and regis-
tered mortgage loan orig-
inators. The individual
states are in the process
of implementing the spe-
cific requirements over
the course of the coming
year. In addition, the U.S.
Department of Housing
& Urban Development
(HUD) has published the
proposed rule for mini-
mum standards as man-
dated by the SAFE Act in order to facili-
tate the responsibilities placed on HUD
under the Act. State laws passed during
2009 and 2010 place requirements on
all mortgage loan originators to comply
with both federal and state laws. The
education and testing requirements of
the new laws make it clear that an
understanding of the laws, are the min-
imum requirement for entry into the
profession. It is the implementation of
the SAFE Act that provides states with
the authority to enforce compliance
with the laws.
Real Estate Settlement
Procedures Act (RESPA)
RESPA now requires a new Good Faith
Estimate (GFE) and HUD-1 form that
requires lenders to make certain that
the actual costs disclosed on the GFE at
Compliant Business Systems:
Part I of III
By Don DeRespinis
According to federal
laws, every mortgage
originator has a legal
responsibility to deter,
detect and defend the
information of every
person they serve.
This requires compa-
nies to closely follow
all relevant laws cov-
ering the operation of
their business.
continued on page 9
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major concern in 2010. Increased Fair
Lending Exam scrutiny rounded out the
top five with 31 percent of lenders
claiming it as a major concern.
Ryan said one surprising result was
the lack of concern for the multi-state
exams many lenders will be facing by
the end of 2010; with only 15 percent
reporting it as a major concern.
Even though 70 percent of QuestSofts
client base will be subject to multi-state
exams by the end of 2010, it ranked at the
bottom of the survey, Ryan said. The
placement of Truth-in-Lending changes
planned for this summer as the second
highest concern suggests that compliance
professionals are being forced to deal with
one new compliance crisis at a time.
Ryan added that since lenders are so
worried with the next immediate change,
they will have to rely on their compliance
partners to look ahead and prepare for
more long-range compliance changes.
For more information, visit www.quest-
soft.com.
RealtyTrac finds
decrease in foreclosure
activity in April
RealtyTrac, an online
marketplace for fore-
closure properties,
has released its U.S.
Foreclosure Market
Report for April 2010,
which shows that foreclosure filings
default notices, scheduled auctions
and bank repossessionswere report-
ed on 333,837 properties in April, a
nine percent decrease from the previ-
ous month and a two percent decrease
from April 2009. One in every 387 U.S.
housing units received a foreclosure fil-
ing during the month.
There were two important mile-
stones in the April numbers that show
foreclosure activity has begun to
plateaubut at a very high level that
will not drop off in the near future, said
James J. Saccacio, chief executive officer
of RealtyTrac. April was the first month
in the history of our report with an
annual decrease in U.S. foreclosure activ-
ity. Secondly, bank repossessions, or
REOs, hit a record monthly high for the
report even while default notices
dropped substantially on a monthly and
annual basis. We expect a similar pattern
to continue for most of this year, with
the overall numbers staying at a high
level and ripples of activity hitting the
various stages of the foreclosure process
as lenders systematically work through
the backlog of distressed properties.
During the month a total of 103,762
properties received default notices, a
decrease of 12 percent from the previous
month and a decrease of 27 percent
from April 2009when default activity
peaked at more than 142,000.
Foreclosure auctions were scheduled for
the first time on a total of 137,643 prop-
pared the marketing materials, and com-
municated directly with investors. Tourre
allegedly knew of Paulson & Companys
undisclosed short interest and role in the
collateral selection process. In addition,
he misled ACA into believing that Paulson
& Company invested approximately $200
million in the equity of ABACUS, indicating
that Paulson & Companys interests in the
collateral selection process were closely
aligned with ACAs interests. In reality,
however, their interests were sharply
conflicting.
According to the SECs complaint, the
deal closed on April 26, 2007, and
Paulson & Company paid Goldman
Sachs approximately $15 million for
structuring and marketing ABACUS. By
Oct. 24, 2007, 83 percent of the RMBS in
the ABACUS portfolio had been down-
graded and 17 percent were on negative
watch. By Jan. 29, 2008, 99 percent of
the portfolio had been downgraded.
Investors in the liabilities of ABACUS are
alleged to have lost more than $1 billion.
The SECs complaint charges Goldman
Sachs and Tourre with violations of
Section 17(a) of the Securities Act of 1933,
Section 10(b) of the Securities Exchange
Act of 1934, and Exchange Act Rule 10b-5.
The Commission seeks injunctive relief,
disgorgement of profits, prejudgment
interest, and financial penalties.
For more information, visit www.sec.gov.
QuestSoft survey finds
RESPA tops compliance
concerns for second
consecutive year
According to QuestSofts annual compli-
ance survey of lenders, the recently
enacted fee tolerance changes to the Real
Estate Settlement Procedures Act (RESPA)
continue to pose the greatest mortgage
compliance concern in 2010. This marks
the second year that RESPA has held the
top spot among the lenders surveyed.
The poll rated the level of concern
among 464 lenders for 12 regulatory
changes affecting the mortgage industry
this year. Eighty percent of respondents
cited the adjustments to fee tolerance
rules set forth in RESPA as a major con-
cern for lending practices. Rounding out
the top three concerns were Truth-in-
Lending Act (TILA) changes (74 percent
cited major concern) and other RESPA
issues (66 percent cited major concern).
Even though RESPAs new rules have
been active for a few months, lenders are
still concerned with how to comply with
the fee tolerance rules and properly dis-
close loan terms to consumers, said
Leonard Ryan, president of QuestSoft.
Lenders are also closely watching preda-
tory lending laws and new regulations at
the state and local levels.
Changes to federal, state and local
lending laws remained the fourth high-
est concern, with 37 percent of lenders
citing these potential changes as a
news flash continued from page 6
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felt that reverse mortgage counselors
should discuss this loan using a holistic
perspective that looks at factors that could
affect a seniors stay in the home and their
level of dependence on the loan funds.
BenefitsCheckUp was developed and is
maintained by NCOA. Since 2001, more
than 2.4 million people have used this
online tool to find benefits programs that
help them pay for prescription drugs,
health care, rent, utilities, and other needs.
We streamlined both FIT and BCU so
they do not overwhelm our clients and
help them look at the big picture. Seniors
who have received counseling through
NCOA have all gone through this process.
Many have told us how
much they appreciate the
additional discussion. We
have never received any
complaint on this approach
from lenders.
Why is FIT an improve-
ment on existing HECM
counseling model?
For people in dire financial
straits, a traditional budget
analysis can be important
to solve their immediate
problems. HUD also recog-
nizes the long-term conse-
quences of taking a reverse
mortgage, and FIT will help
counselors engage their
clients in this deeper con-
versation. It is a tool to pro-
mote discussion, not just a
checklist. It is a way of get-
ting people, whose judg-
ment may be clouded by
immediate needs, to think
long-term about how they
plan on staying at home so they can get
the full value of this loan.
FIT has counselors ask seniors a series of
questions relating to risk factors that may
not be considered a normal part of the dis-
cussion in taking out a loan. For example,
is the person living alone? Have they had a
recent fall? Do they live in a house with
stairs or other barriers?
By themselves, each of these issues
may not be a risk, but they can add up.
For example, seniors who live alone may
have few other resources so they may be
overly dependent on a reverse mortgage.
If they are also in poor health and their
financial needs exceed their expectations,
they may soon find themselves unable to
fulfill their borrower obligations, such as
paying property taxes, homeowners
insurance and home maintenance. These
types of risks, which we call yellow
flags, are important and should be
added to the overall assessment of a per-
sons needs and goals.
BenefitsCheckUp produces a cus-
tomized report which describes federal,
state and some local programs for which
a client may be eligible; it also provides
contact information to help them apply
for these benefits. For many middle-
income families, the types of public pro-
grams they can get may be modest. But
getting help with programs, such as
weatherization, home repairs or with
Meals-on-Wheels, can make the differ-
ence between being able to stay at
home, and not.
Is HUD going to make
FIT and BCU mandatory
tools for counselors?
That is our understanding.
HUD is partnering with NCOA
and the Administration on
Aging (AoA) to provide the FIT
and BCU as budget tools for
reverse mortgage counsel-
ing. Counselors will be
required to complete a
budget with every client
during the counseling ses-
sion based on information
obtained from the client
using these tools. As part
of FIT, counselors will
review their clients
monthly budget shortfalls,
including extra cash need-
ed for everyday expenses,
health needs, family sup-
port and property taxes.
They will also review their
need for a lump sum
amount to pay off existing
debt, make home modifications, and to
meet other financial goals.
Atare E. Agbamu, CRMS is author of
Think Reverse! and more than 130 arti-
cles on reverse mortgages. Since 2002, he
writes the nationally distributed column,
Forward on Reverse. Through his adviso-
ry, ThinkReverse LLC, Agbamu advises
financial professionals, institutions, and
regulators across the country. In a 2007
national report on reverse mortgages,
AARP cited Agbamus work. He can be
reached by phone at (612) 203-9434 and
e-mail at atare@thinkreverse.com.
Visit author Atare E.
Agbamus blog at thinkre-
verse.com for his thoughts
and insights on the reverse
mortgage marketplace.
forward on reverse continued from page 6
FIT will help coun-
selors engage their
clients in this deeper
conversation. It is a
tool to promote dis-
cussion, not just a
checklist.
Dr. Barbara Stucki, Vice
President of home equity
Initiative, National Council
on Aging (NCOA)
continued on page 11
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time of application, harmonize with
the Settlement Statement the borrower
sees at closing. In the past, the forms
routinely differed, causing consumer
complaints that led to the new regula-
tions. If the amounts are expected to
differ during the loan process due to
verifiable changes in circumstances,
the lender is required to re-disclose
and issue a revised GFE. At the same
time, all the calculations must be con-
sistent on the system to make certain
the HUD-1 accurately reflects the
changes. Failure for compliance will
require mortgage brokers and lenders
to detect such violations and reim-
burse customers within 30 days of clos-
ing or face penalties and increased
rescission periods. Failure to comply
will increase costs to brokers.
Truth-in-Lending Act (TILA)
The final rule regarding TILA changes
should be published at some point in
2010. The final rule will redefine fees
and charges considered finance charges
for annual percentage rate (APR) pur-
poses, change the TIL Statement con-
tent and format, including amortization
types, prohibit payments to mortgage
brokers or creditor loan officers based
on the interest rate or other loan terms,
prohibit steering consumers to less
favorable loans in order to increase
compensation, require 60-day notifica-
tion of ARM loan changes, require
monthly statements on loans where
negative amortization is possible,
replace home equity line of credit
(HELOC) disclosure, enhance periodic
statements for open-end credit, require
45-day notice for changes to HELOC
terms and change protections regarding
credit line suspensions or reductions.
Fair and Accurate Credit
Transactions Act of 2003
(FACTA)/Red Flags
FACTA directed financial regulatory
agencies, including the Federal Trade
Commission (FTC), to promulgate rules
requiring creditors and financial
institutions with covered accounts to
implement programs to identify,
detect, and respond to patterns, prac-
tices, or specific activities that could
indicate identity theft. FACTAs defini-
tion of creditor applies to any entity
that regularly extends or renews cred-
itor arranges for others to do so
and includes all entities that regularly
permit deferred payments for goods or
services. Accepting credit cards as a
form of payment does not, by itself,
make an entity a creditor. Some exam-
ples of creditors are finance compa-
nies, automobile dealers that provide
or arrange financing, mortgage bro-
kers, utility companies, telecommuni-
cations companies, non-profit and gov-
ernment entities that defer payment
for goods or services, and businesses
that provide services and bill later,
including many lawyers, doctors and
other professionals.
Gramm-Leach-Bliley Act
The Gramm-Leach-Bliley Act imposed
strict guidelines for the security and
disclosure of Non-Public Private
Information (NPPI). Privacy laws
changed dramatically under this new
law passed in 1999. The Gramm-Leach-
Bliley Act imposed strict guidelines for
the security and disclosure of NPPI. The
complete law can be found at
www.ftc.gov/privacy/glbact/glbsub1.htm.
Responsible Information
Management
Every person in your organization must
be held accountable and every organiza-
tion must create a system of Responsible
Information Management. This system
must be in use every day and by every
employee. In order to meet the require-
ments, every company must:
1. Raise awareness
2. Create policies and protections
3. Train its staff
4. Hold all employees and vendors
accountable
5. Monitor and re-train employees on
policy breaches
6. Actively protect customers
7. Detect risks
8. Respond to violations and breaches
In developing a compliant system,
just as in any other process, it starts at
the top. In this case, the top begins
with the Responsible Individual.
Responsible Individuals
The federal SAFE Act, as implemented by
many states, created a new classification
of individuals for employment purposes
in mortgage lending operations. The
Responsible Individual (RI) or a branch
manager is required to have two to three
years of experience in the mortgage
business, within the five years immedi-
ately preceding the application.
compliant business systems continued from page 7
continued on page 12
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Ellie Mae files registration
statement for proposed
IPO and is approved by
Wells Fargo as a
technology partner
Ellie Mae Inc. has
announced that it
has filed a registra-
tion statement on Form S-1 with the
U.S. Securities & Exchange Commission
(SEC) relating to a proposed initial pub-
lic offering (IPO) of shares of its com-
mon stock. The number of shares to be
offered and the price range for the
offering have not yet been determined.
The shares of common stock to be sold
in this offering are proposed to be sold
by Ellie Mae and certain stockholders.
The underwriters of the offering will be
Goldman, Sachs & Company; William
Blair & Company, Keefe, Bruyette &
Woods, Macquarie Capital, Piper Jaffray
and ThinkEquity LLC.
The offering will be made only by
means of a prospectus. When available,
a copy of the preliminary prospectus
relating to the offering may be
obtained from Goldman, Sachs &
Company, 200 West Street, New York,
NY 10282-2198 Attention: Prospectus
Department.
A registration statement relating to
these shares of Ellie Mae common stock
has been filed with the SEC but has not
yet become effective. These shares may
not be sold nor may offers to buy be
accepted prior to the time the registra-
tion statement becomes effective. This
press release shall not constitute an
offer to sell or the solicitation of an
offer to buy, nor shall there be any sale
of the shares of Ellie Maes common
stock in any jurisdiction in which such
offer, solicitation or sale would be
unlawful prior to registration or qualifi-
cation under the securities laws of any
such jurisdiction.
Ellie Mae has also announced that
Wells Fargo Funding has approved
Encompass360, Ellie Maes mortgage
management solution, for e-signing
and e-delivery of disclosure docu-
ments. Users of Encompass360 can now
meet Wells Fargo Funding submission
requirements after not only electroni-
cally delivering disclosure documents
to borrowers, but also having borrow-
ers electronically upload, sign and
deliver disclosures back to the lender
via Ellie Maes WebCenter, a consumer
portal that securely connects borrowers
to their originators Encompass360 sys-
tem.
Wells Fargo Fundings correspon-
dents are able to leverage
Encompass360s robust capacity for
fully auditable, transparent and secure
e-signing and e-delivery of disclosure
documents, says Jonathan Corr, chief
strategy officer for Ellie Mae.
Encompass360 was created to provide
the built-in ability to leverage the
power and speed of the Internet, so all
Wells Fargo Funding needed to do was
provide its best-practice guidelines and
requirements.
In order to comply with Wells Fargo
Fundings certification requirements,
Ellie Mae made several adjustments to
Encompass360s e-signing process. For
the DOL does have the power to with-
draw its prior guidance regarding mort-
gage loan officers, and there is little
doubt that employers now have less
certainty regarding the exempt status
of the position than they did before the
DOL issued its Administrative
Interpretation. For that reason, many
employers in the mortgage lending
industry that have taken
the DOLs new position at
face value, are beginning
to analyze how it will
affect their employees.
In considering whether
to shift loan officers to an
overtime-eligible status,
employers first need to
assess the type of work that
the loan officers are doing.
The DOLs Administrative
Interpretation leaves in tact
a prior finding that loan offi-
cers may meet the outside
sales exemption to federal
overtime pay requirements, if
their jobs require that they
spend a significant portion
of their working time
engaged in sales and pro-
motional activities outside
of their employers office.
Yet, in the modern business
environment, face-to-face
meetings with clients and
prospects have often been
replaced by phone calls, e-
mails and text messages.
For that reason, many
employers will find that their loan officers
spend much of their time working the
phones, online and meeting with cus-
tomers in a stationary office. Even those
lenders that have loan officers who spend
a significant amount of their time in the
field find themselves in an uncertain posi-
tion because the exact amount of time
that an employee must spend outside to
meet the exemption remains unclear.
Thus, many mortgage loan companies
have begun to consider reclassifying loan
officers as non-exempt and eligible for
overtime compensation. This raises a
number of legal and business issues that
these employers must address in order to
ensure the continuing profitability of the
loan officer position, while steering clear
of prohibitions in other provisions of the
state and federal wage laws.
Generally, an overtime-eligible
employee is paid overtime pay at one-
and-a-half times his regular hourly rate.
In addition to the many other new reg-
ulations in the finance industry, mort-
gage lenders now also find themselves
wrestling with an old employment
issue that until recently had been
resolved in their favor. On March 24,
2010, the U.S. Department of Labor
(DOL) announced a drastic change in
the agencys views about how mort-
gage loan officers must
be paid. During the prior
administration, the DOL
issued a number of opin-
ion letters based on spe-
cific facts finding that
mortgage loan officers
are exempt from federal
overtime pay require-
ments. In March, howev-
er, the DOL reversed
these findings and reject-
ed the decades-old prac-
tice of issuing opinion
letters based on specific
factual circumstances.
Instead, the DOL issued
a new Administrative
Interpretation making
the blanket statement
that mortgage loan offi-
cers generally are not
exempt from federal over-
time pay requirements
under the Administrative
Exemption to overtime
paythe most common
exemption applied by
employers to their mort-
gage loan officers, in
addition to many other similar posi-
tions. While the interplay of the vari-
ous federal overtime exemptions can
be complicated, the bottom line to the
DOLs new position is that many mort-
gage loan officers who have long been
paid on a salary plus commission basis
now arguably must be paid overtime
pay for any hours in excess of the 40
that they work in a week.
1
As a result,
mortgage lenders are struggling to find
a way to reconcile the shift in the DOLs
position with the realities of the lend-
ing marketplace.
The first challenge that employers
face is understanding the significance
and impact of the DOLs new
Administrative Interpretation. The DOL
does not have the power to change fed-
eral law merely by issuing interpretive
guidance, and some employers may use
the courts to challenge the validity of
the DOLs reversal in position. However,
even if the DOLs new view is vulnera-
ble to legal challenge, it is likely that
Department of Labors Reversal
Requires Creative Approach to
Compensation for Mortgage
Loan Officers
By Tim Watson and Barry Miller
The DOL does not
have the power to
change federal law
merely by issuing
interpretive guid-
ance, and some
employers may use
the courts to chal-
lenge the validity of
the DOLs reversal in
position.
Tim Watson, Partner, Labor
& Employment Department,
Seyfarth Shaw LLP
continued on page 12
continued on page 21
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1999
$
799
$36.5 billion, or 44 percent of the lend-
ing total.
Relatively few commercial mort-
gages were made in 2009, as the reces-
sion curtailed both the supply of and
demand for new mortgage debt, said
Jamie Woodwell, MBAs vice president
of commercial real estate research. As
the recession has receded, origination
volumes have picked up slightly, but
the absolute levels remain low.
Among the key findings are:
O Decreases were seen across most
property types and investor groups,
and were led by declines in loans
O Lending for office properties had the
largest percentage decrease in origina-
tions by property type, followed closely
by retail properties and hotels/motels.
Year-over-year changes are based on
the changes in volume among repeat
reporters that participated in both the
2008 and 2009 surveys.
For more information, visit www.mort-
gagebankers.org.
MARI reports mortgage
fraud still on the rise
Reported incidents of
mortgage fraud and
misrepresentation by
professionals in the
mortgage industry in
erties during the month, a decrease of
13 percent from the previous month
when auction activity peaked with more
than 158,000 properties scheduled for
auction for the first time. Auction activi-
ty was up one percent from April 2009.
Bank repossessions and real estate-
owned (REO) properties hit a record
monthly high for the report in April, with
a total of 92,432 properties repossessed
by lenders during the monthan
increase of one percent from the previ-
ous month and an increase of 45 percent
from April 2009. Bank repossessions were
less than one percent above their previ-
ous peak of 92,182 in December 2009.
Nevada posted the nations highest state
foreclosure rate for the 40th straight
month, with one in every 69 housing units
receiving a foreclosure filing in Aprilmore
than five times the national average. A 57
percent monthly increase in REO activity
pushed the states overall foreclosure activ-
ity up 10 percent from the previous month,
but overall foreclosure activity was statisti-
cally unchanged from April 2009.
Arizona foreclosure activity decreased
nearly 15 percent from the previous
month, but the states foreclosure rate
moved from third highest in March to
second highest in April thanks to an even
bigger decrease in California. One in
every 169 Arizona housing units receiv-
ing a foreclosure filing in Aprilmore
than twice the national average.
Florida posted the nations third
highest foreclosure rate, with one in
every 182 properties receiving a foreclo-
sure filing, despite monthly and annual
decreases in foreclosure activity.
California posted the nations fourth
highest foreclosure rate, with one in
every 192 housing units receiving a
foreclosure filing, and Utah posted the
nations fifth highest foreclosure rate,
with one in every 221 housing units
receiving a foreclosure filing.
For more information, visit www.realty-
trac.com.
MBA finds
commercial/multifamily
originations down 46
percent in 2009
Commercial and
multifamily mort-
gage origination
volumes decreased
46 percent in 2009
among repeat reporters, with mortgage
bankers reporting $82.3 billion of closed
commercial and multifamily loans,
according to the Mortgage Bankers
Associations (MBA) 2009 Commercial
Real Estate/Multifamily Finance: Annual
Origination Volume Summation report.
Commercial banks and savings institu-
tions were the largest single investor
group for commercial and multifamily
mortgages, responsible for $19.8 billion,
or 24 percent, of the closed loan vol-
ume. Multifamily properties were the
dominant property typerepresenting
news flash continued from page 8
intended for: Credit companies;
REITS, mortgage REITs and invest-
ment funds; and Commercial mort-
gage-backed securities (CMBS), col-
lateralized debt obligations (CDO)
and other asset-backed security
(ABS) conduits.
O $15.9 billion of multifamily loans
were closed for Fannie Mae, a 32
percent decline from 2008.
O $15.2 billion of multifamily loans
were closed for Freddie Mac, a 24
percent decline from 2008.
O $5.8 billion of loans were closed for
the Federal Housing Administration
(FHA)/Ginnie Mae, a 168 percent
increase from 2008. Loans for Fannie
Mae and Freddie Mac accounted for
85 percent of the total reported mul-
tifamily volume in 2009. continued on page 15
Photo credit: Stockbyte
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a result, mortgage broker business channels have all but dried up. Some in the
industry were even predicting the end of broker originations less than a year ago.
Given an overall economic malaise and the near decimation of their livelihood, it
shouldnt be any wonder that many surviving brokers did not emerge personally
unscathed, although their practices and their loan performance stats were high.
Taking these circumstances into account could help persuade a potential
wholesale partner that a brokers personal credit score is not wholly, or even
largely, indicative of trustworthiness. In other words, it is incumbent on brokers
to come to their own defense, to professionally explain their record and to per-
suade wholesalers to take a more balanced perspective on subjective trust indi-
cators, such as credit score when, in fact, objective trust indicators such as
licensing and loan performance are more reliable measures.
Another useful strategy for countering wholesalers reliance on brokers personal
financial information is for brokers to shift attention instead to their business credit
report. Clearly, a broker could contend, a business credit report illustrates the financial
stability of the enterprise and is more likely relevant to the wholesale lenders TPO risk
management strategy. Regardless of their personal financial profile, brokers have a
vested interest in the standardization of TPO due diligence criteria and need to advo-
cate for fairness. One way to turn the conversation to the brokers business credit would
be to provide wholesalers with their business credit report.
Does this mean suggesting to wholesalers that they completely ignore a brokers
personal credit report? Absolutely not, that is no way to earn credibility. A brokers
strategy to establish trust must include acknowledging personal credit history as a
viable source of clues as to a particular brokers fidelity. However, it must also
include making a persuasive argument to wholesale partners that placing too much
weight on personal credit history and failing to take business credit into account
could prevent lenders from engaging in relationships with reputable brokers.
Trust but verify just may be a quality brokers best advice to wholesale
mortgage bankers.
Greg Schroeder is president of Comergence Compliance Monitoring. To learn more
about how the Comergence Compliance Trusted Mortgage Professional program
can help, call (714) 495-4720.
THE
MORTGAGE
PROFESSIONAL
TRUSTED
continued from page 7
There are many references to
Responsible Individuals or branch man-
agers, but there is no information on
what a Responsible Individuals actual
responsibilities are. The RI is pretty much
responsible for everybody involved in all
loan transactions that happen in the
branch. The parties can include origina-
tors, processors, customers, appraisers,
lenders, attorneys, title companies, ven-
dors, landlords and the list continues.
They must be responsible for the appli-
cation of the laws, and for the preven-
tion and detection of fraud. They must
be responsible for reports required by
state banking departments, and most
importantly, notifying the banking
department about key changes and
actions by originators, including felonies
and other events, such as bankruptcies
or other conditions.
In Part II of this series, Compliant
Business Systems, I will cover the require-
ments of a Responsible Individual to know
the key components in implementing a
compliant system.
Don DeRespinis is a certified public account-
ant (CPA) and a Certified Residential Mortgage
Specialist (CRMS). He and his wife Deb Killian
have operated Charter Oak Lending Group
LLC, a mortgage broker and correspondent
lender with licenses in Connecticut, New York
and Florida for the past 15 years. They have
also developed a comprehensive and integrat-
ed business operating system used to operate
all aspects of a mortgage origination branch,
including integrated document management,
communication management, accounting,
compliance and controls. For more informa-
tion, visit www.mortgagecenter.net or e-mail
danbury@snet.net.
compliant business systems continued from page 9
One problem created by treating loan offi-
cers as overtime-eligible employees is that
commissions and certain other incentive
compensation will generally be included
in the employees regular rate in calcu-
lating their overtime pay. This may create
unpredictability in loan officers compen-
sation and the profitability of the loans
that they close. Common sense and expe-
rience reflect that loan officers generally
sell and close more loans in
the weeks during which
they work the most hours.
This can create a multiply-
ing effect on the cost of
overtime pay by driving up
the hourly rate of pay dur-
ing weeks in which loan
officers are also working the
largest number of overtime
hours. This means that loan
officers compensation for
each loan closed during
high volume weeks may be
artificially inflated, and the
profitability of those loans
to the lender may decrease
as a result. This dynamic
may be amplified by the
fact that the lending indus-
try is inherently cyclical and
prone to periodic lulls and
surges in activity, with the
result that a lenders entire
workforce will often be
busy at the same time.
Having all employees
become busy at the same
time may, in addition to
creating a companywide
spike in overtime cost, limit
the lenders ability to use
creative or adaptive sched-
uling of employees to limit
the number of overtime hours worked.
Given that profit margins on mortgage
loans have decreased in the current econ-
omy, many lenders view these aspects of
paying overtime to loan officers as a seri-
ous business challenge.
There are many changes to a lenders
business operations that may lessen the
impact of treating loan officers as over-
time eligible. One such measure is to
manage loan officers working hours and
attempt to reduce the number of over-
time hours worked. Lenders that have
always treated the position as exempt
may have had no reason to analyze or
manage those employees efficiency in
the past and allowed them to set their
own schedules without much direction or
oversight. Those employers may find that
there are efficiencies to be gained by hav-
ing managers more actively engaged in
the supervision of loan officers day-to-
day activities. However, employers must
be mindful that this approach may
threaten to decrease a loan officers level
of production or encourage them to
improperly under-report their working
hours, creating additional potential legal
exposure. Another approach would be to
hire additional loan officers or support-
ing employees in order to spread the
work over a larger number of employ-
ees. Increased staffing, of course, comes
with its own costs and may lead to dis-
satisfaction among current employees
who may see their total individual com-
pensation reduced.
In view of the challenges posed by
decreasing the number of overtime hours
that mortgage loan officers
work, some lenders may
consider measures that
they can take to design a
compensation program for
loan officers that preserves
the profitability of the
lenders operations and
increases the predictability
of overtime compensation
costs, while complying with
the DOLs new position
regarding overtime pay
requirements.
One measure that will
reduce the cost of includ-
ing commissions in over-
time pay is to provide a
significant level of hourly
compensation to loan offi-
cers that is independent of
loan volume, in addition
to some commissions on
loans sold or closed. This
approach would reduce
the multiplying effect of
including commissions in
overtime pay for busier
working weeks. The exact
balance between hourly
compensation and com-
mission rates that best
serves to control overtime
costs, while preserving
appropriate incentives for employees,
will vary based on the nature of each
lenders operations.
More innovative employers that are
willing to more fundamentally redesign
the way that loan officers are paid may
move away from traditional commission
formulas tied directly to production of
loan volume and calculated on a week-
by-week basis. For example, a lender
might adopt a quarterly incentive com-
pensation program that takes into
account a variety of performance factors,
such as quality of customer service, cap-
ture rates, timely documentation of
transactions, and promotional activities,
in addition to overall level of production.
If properly constructed, such a compen-
sation program would allow employers
to spread out incentive compensation
across factors that will have less week-
to-week variation than simple produc-
tion and also to average incentive com-
pensation over the weeks in each quar-
ter in a way that blunts the multiplying
effect of the week-to-week variations in
activity. The design of such programs
department of labors reversal continued from page 10
Even those lenders
that have loan offi-
cers who spend a sig-
nificant amount of
their time in the field
find themselves in an
uncertain position
because the exact
amount of time that
an employee must
spend outside to meet
the exemption
remains unclear.
Barry Miller, Associate,
Labor & Employment
Department, Seyfarth
Shaw LLP
continued on page 15
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MORT GAGE
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even during times of massive origination
volumes.
The top fraud incident type in 2009
representing 59 percent of all reported
fraud typeswas application misrepre-
sentation. This is the sixth year in a row it
has topped the list. In second place were
frauds related to appraisal and valuation
misrepresentation, which increased from
22 percent of reported misrepresentation
in 2008 to 33 percent; with an 11 percent
increase, this is the most notable increase
in reported fraud types in 2009.
Additional documented fraud types
included, in order of volume, verifications
of deposit, verifications of employment,
escrow or closing costs, and credit reports.
Overall there has been a slight downward
trend in total application fraud and mis-
representation moving from a high of 67
percent in 2005 to 59 percent in 2009.
Lenders are facing hurdles with com-
pliance, loss mitigation and staving off
additional financial losses due to poor
loan performance, said Denise James,
LexisNexis Risk Solutions director of real
estate solutions and co-author of the
report. This is not to say that mortgage
fraud is going away; it is still a serious
problem, and new trends continue to
emerge. It remains critical for those in the
mortgage industry to reassess their
processes, work together by sharing infor-
mation and reporting incidents of fraud-
ulent activity, and ready themselves for
more complex schemes in order to con-
tinue the fight against mortgage fraud.
These results are further evidence that
lenders need to reconsider who they
engage to perform appraisal assignments,
said Appraisal Institute President Leslie
Sellers, MAI, SRA. The best way to mitigate
real estate valuation fraud is to hire a com-
the U.S. are continuing to climb and
increased by seven percent from 2008 to
2009, according to a new report released by
the Mortgage Asset Research Institute
(MARI), a LexisNexis service. While the
pace has slowed since the 2007-2008
increase of 26 percent, the continued
increase is believed to be attributed to
better industry reporting and policing.
The 12th Periodic Mortgage Fraud
Case Report examines the current state
of residential mortgage fraud and mis-
representation in the U.S. committed
by professionals, based on data sub-
mitted by LexisNexis MARI subscribers.
Florida, ranked number one in 2006
and 2007, has moved back into first place
in the country for mortgage fraud and
misrepresentation after being displaced
in 2008 by Rhode Island. Florida also has
close to three times the expected amount
of reported mortgage fraud and misrep-
resentation for its origination volume.
Rhode Island is not ranked on the top 10
list for 2009 because the states sample
size did not meet the minimum require-
ments set for the survey.
New York moved into second place,
followed by California, Arizona,
Michigan, Maryland, New Jersey, Georgia,
Illinois and Virginia. This is the first
appearance on the LexisNexis Mortgage
Asset Research Institute Report top 10 list
for New Jersey and Virginia.
The data suggests that in 2009 there
was a seven percent increase in the num-
ber of incidents of fraud reported to the
LexisNexis Mortgage Asset Research
Institute on top of the 26 percent increase
reported in 2008, said Jennifer Butts,
LexisNexis Mortgage Asset Research
Institute manager of data processing and
co-author of the report. While this is a
noticeable increase, we believe that mort-
gage fraud is significantly understated,
news flash continued from page 11
involves the balancing of a number of
competing factors, including ensuring
that features designed to control over-
time costs do not create undue cash flow
problems for employees or jeopardize
the employers ability to recruit and
retain top performers. Employers can
take some of the guesswork out of the
process of redesigning compensation
programs through statistical analysis of
historical compensation and productivity
data, in order to better understand their
employees working patterns and com-
pensation expectations.
Employers that are proactive in
responding to the DOLs reversal in its posi-
tion regarding loan officers and overtime
compensation will be in the best position
to avoid costly litigation and may also find
themselves at a competitive advantage in
the marketplace by ensuring that their
compensation practices are well-aligned
with their business objectives.
Tim Watson is a partner in the labor and
employment department of Seyfarth
Shaw LLP in Houston, Texas. He may be
reached by phone at (713) 860-0065 or
e-mail twatson@seyfarth.com. Barry
Miller is an associate with the labor and
employment department of Seyfarth
Shaw LLP in Boston. He may be reached
by phone at (617) 946-4806 or e-mail
bmiller@seyfarth.com.
Footnote
1Many states have their own wage and
hour statutes that have more onerous
overtime requirements. For example, in
California, employers must pay overtime
to non-exempt employees for each day an
employee works in excess of eight hours.
department of labors reversal continued from page 12
continued on page 20
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Copyright 2010 Emigrant Mortgage Company, Incorporated (Emigrant). All rights reserved. Emigrant is a subsidiary of Emigrant Bank, Member
FDIC and is an Equal Opportunity Lender. All product names, company names and logotypes are servicemarks or trademarks of Emigrant in the
United States and other countries. The information, products and services contained in this advertisement are believed to be correct but may
include inaccuracies, typographical errors and/or omissions. Emigrant does not guarantee the accuracy of the data contained herein. This
information is intended for mortgage and/or real estate professional use only and should not be distributed or presented to consumers or any
other third parties. This is not an offer or guarantee to extend consumer credit. Program guidelines, terms and/or conditions are subject to change
by Emigrant without notice. All loans are subject to submission of a complete application, underwriting review and credit and property approval
by Emigrant. Not all products and/or programs are available in all states and/or localities and/or for all loan amounts. Certain products / program
are offered through third parties. Other restrictions and limitations may apply. New York Licensed Residential Mortgage Lender: Exempt.
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A Look Back at the Past Year in NAMB
A Message From NAMB President Jim Pair, CMC
I cannot believe that 12 months have passed so quickly. It seems like
yesterday that I took the oath of office as president of the National
Association of Mortgage Brokers (NAMB). During this last year, we have
faced many challenges, but these challenges have presented us with
many opportunities to build a better future.
Many of you have stepped forward as volunteers and worked tire-
lessly to ensure our industry remains a viable channel of distribution for the con-
sumer. Through your efforts, you have built a stronger relationship with Congress
and the regulatory agencies. Our relationship with them is better than ever thanks
to the dedication of our volunteers and staff.
I wish I had the space to name all of the volunteers who have worked so hard this
past 12 months. I do want to thank Harry Dinham, Government Affairs Committee Co-
Chair and Mike Anderson, Government Affairs Committee Co-Chair, for their work this
past year. It has been a very busy year in Congress and with the regulatory agencies,
and both Harry and Mike have lead us through this regulatory maze, volunteering long
hours to protect our interests and that of the consumer.
George Hanzimanolis has worked tirelessly with NAMB Enterprises to find new
companies that will not only provide benefits to our members, but will be a
source of new revenue for the association.
John Councilman, chairman of the FHA/VA Committee, has been a star working with
the U.S. Department of Housing & Urban Development (HUD) and the Federal Housing
Administration (FHA) on all the changes that have occurred this last year. If you ever
have a question about HUD or FHA, John is the expert. His knowledge and expertise
has built a close working relationship with these two governmental agencies.
Olga Kucerak, chair of the Membership Committee, stepped in to take over the
committee early in my term. She immediately picked up where she left off from serv-
ing as chair last year, and has guided us through many changes over the past year.
There are so many others who should be recognized, but space just does allow
me the opportunity to give you the credit you each so richly deserve. We all know
who you are and what you have done for the association.
The glue that has held our association together this past year has been the staff of NAMB,
lead by Chief Executive Officer Roy DeLoach. Roy, along with Assistant Director of
Government Affairs Jon Otto, Director of Membership and Marketing Paul Niermann,
Finance Coordinator David Breedlove, and Director of Certification Anika Sallinas need spe-
cial recognition for all they have done and under some very difficult changes that NAMB has
experienced this year. They are truly dedicated to the mission of NAMB and our industry.
Roy has provided the leadership and cohesion that was needed to see us through this year.
Last June at our annual meeting, I presented Roy with the Energizer Bunny
Award. This year, he should receive at least three Energizer Bunnies as he has
done the work of three people and has managed to be everywhere at the same
time. We are very fortunate to have such a dedicated staff. When you see them,
please give them a big thank you for all they do for us.
Congratulations to Bill Howe, our incoming president, and NAMBs 2010-2011
officers and directors as they take office at the annual meeting in June. It will be
an exciting time for all of us as we work with Bill to implement his plans and
objectives for the coming year.
Again, I thank you for the opportunity to have served as your president. It has been dif-
ficult for all of us these last few years. I know there are better times ahead for us. Reading
this means you have survived the worst and proven that you are a true professional. Our
channel of distribution is needed by the industry and the consumer. We will continue our
efforts to strengthen our industry and protect the consumers we serve every day.
Jim Pair, CMC is with Mortgage Associates Corpus Christi and is president of
the National Association of Mortgage Brokers. He may be reached by e-mail at
jimpair@namb.org.
Certification? Certainly!
Time
A Message From NAMB Certifications Committee
Chair Pava J. Leyrer, CMC, CRMS
As I approach this, my last article as Certification Committee Chair of
the National Association of Mortgage Brokers (NAMB), I am amazed at
how quickly time seems to fly by in our daily lives. As we have all been
preparing for SAFE Act Licensing and watching events in our industry
unfold, time seems to be moving more for us than we may expected.
Reflecting on the basic priorities this past year or two has strengthened
some individuals, saw others leave our industry, and still has everyone evaluating
what we should continue to do.
I have seen 33 years of change, but yet one thing has remained constant and that
is the passion I see in those who still fight to maintain the professional independ-
ence to service consumers. It seems that many, especially in our government, view
the past few years as something that could occur again, but they would be wrong
in my opinion.
The circumstances of unlicensed, educated and certified individuals coupled
with the magnitude of greed from Wall Street and lenders is now so tightly regu-
lated that those individuals have moved on. I believe that the majority of us still
here hold our experience and knowledge as a great importance and are extreme-
ly proud of what we do for families and our communities.
It is also now more important than ever to keep our reputations and businesses
above the rest. The integrity and trust mortgage brokers and their loan originators
have displayed is the backbone of what continues to be of great importance in the
financing of the American dream of homeownership. Now, more than ever, the vol-
untary certifications and required licensing of our profession sets us apart from oth-
ers. Set time aside today to become certified. I have seen a difference from it and I
believe you will too.
Thank you for the opportunity to serve you this past year!
Pava J. Leyrer, CMC, CRMS, is president and owner of Heritage National Mortgage
Corporation in Grandville, Mich., and Certifications Committee chair for the
National Association of Mortgage Brokers. She may be reached by phone at (616)
534-4993 or e-mail pava@heritagenational.com.
For more information on the National Association of Mortgage Brokers, visit www.namb.org.
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Each month, National Mortgage
Professional Magazine will focus on one
of the industrys top players in our
Mortgage Professional of the Month
feature. Our readers are encouraged to
contact us by e-mail at newsroom@nmp-
mediacorp.com for consideration in
being featured in a future Mortgage
Professional of the Month column.
This month, we had a chance to chat
with Michael Maida, national sales
director of GSF Mortgage Corporation.
Michael has a long history of work-
ing in the mortgage industry, with near-
ly 20 years invested in the industry. His
background includes working with some
of the largest wholesale brokers in the
Wisconsin area. He then went on to
serve in the capacity of an account exec-
utive for lenders such as Countrywide.
His expertise in both the sub-prime and
conforming arena made him one of the
leading AEs in his region, helping loan
originators in expanding their customer
base and knowledge of the industry. He
earned several awards for his accom-
plishments of reaching new highs in
production levels and closing ratios.
Having been able to not only origi-
nate business, but teach others how to
do the same, along with his vast knowl-
edge of the industry guidelines and reg-
ulatory issues continuing to change, led
him to his current position as national
sales director for GSF Mortgage
Corporation. At GSF, he directs a staff of
AEs, as well as gets involved with all
Michael Maida, National Sales Director, GSF Mortgage Corporation
pending legislation and is influential in
implementing legislative changes within
the company. Michael also has been
actively involved with local banks and
credit unions to help them with their
mortgage divisions and implement qual-
ity control within their organizations.
Please tell us how you first got into
the mortgage business.
In 1992, I entered the industry as a loan
originator. After a year or so in the industry,
I was then given the opportunity to manage
branch development. Being involved with
retail for approximately six years, I then
entered the wholesale arena, starting with
a regional lender, which gave me the
opportunity to hone both my personal
underwriting and loss mitigation skill sets
that have proven to be one of the best
things Ive learned from my wholesale
experience. As my experience grew, I was
given the opportunity to work for one of
the largest wholesale lenders at that time.
That experience taught me best practices
in employing analytics to measure busi-
ness partner performance from a prof-
itability standpoint.
Give us a brief history about GSF
Mortgage Corporation.
GSF Mortgage was created in 1995. The
principals of the company, as well as
most of the branch management
team, have worked together over 35
years, going back to a finance compa-
ny that exited the lending arena. GSF
Mortgage opened GSF Funding to fund
and source FHA, FNMA, FLMC, USDA,
VA and conforming products for its
retail division. GSF Mortgage manages
ancillary companies that compliment
the retail platform, from real estate,
title and funding, along with real
estate development.
GSF now offers various solutions for
mortgage companies of all sizes, from
branch management opportunities, to
wholesale programs, to correspondent
programs.
What was the genesis for this all-
encompassing platform?
In 2007, we had a vision of encompass-
ing both wholesale, delegated and non-
delegated correspondent lending to our
funding platform. Our successes in
those arenas were contributed to the
development of stewardship programs
for both wholesale customers develop-
ing FHA lending sponsorship and mort-
gage bankers developing robust corre-
spondent platform.
Over the last two years, our whole-
sale business partners have suffered
substantial headwind from both regula-
tory and market-driven challenges.
Being quick to react to environmental
and economic challenges, we added the
Professional Branch Opportunity to our
product suite. We are welcoming both
existing wholesale customers who we
have matured along the years, as well
new business partners to our retail
branch environment. That has been
extremely successful for both GSF and
the business partners new to banking.
What role does your wholesale sale
account executives play in managing
these platforms?
One of the roles our AEs provide is to ini-
tiate the first line of defense in risk miti-
gation, by holding the business partner
to the highest standard of submission.
They also assist operationally through
aggressive pipeline management. GSF
also provides our account executives with
a professional marketing and public rela-
tions team to assist in vetting potential
clients. My philosophy in getting the
most out of our sales staff is to compen-
sate commissioned employees on the
higher end of the scale. Although our
comp expense percentage may seem
higher than what we deemed acceptable
in the past, what we gain is an increase in
operational effectiveness due to a higher
quality product entering our system. You
take out most of the loan level challenges
most AEs typically deal with, thus freeing
up more time to train our business part-
ners on GSFs policy and procedural effi-
ciencies that help maximize the overall
velocity of submission to consummation.
The end result is this greatly reduces your
cost to produce, which in turn, results in
lower margins necessary to maintain
profitability.
Training our AEs in managing multiple
customer groups (wholesale, correspondent
and retail branch management) insulates
our sales force from a changing landscape
that threatens their livelihood, or second-
ary market appetite which, from time to
time, impacts each business channel.
What are your current efforts given
the unstable environment of mort-
gage lending today?
We have, until most recently, focused on
our existing wholesale customers for
branch opportunities, reaching out
through normal prospecting measures to
deliver the message from our AEs. We now
provide our AEs with a professional mar-
keting and PR team to assist in vetting
potential clients. We have also expanded
our outreach through various vehicles,
including advertising in National Mortgage
Professional Magazine and other outlets.
This message we are trying to deliver again
is to say: No matter what you are, you
have a home with GSF Funding and we are
going to properly back your loan and pro-
vide the tools necessary to be successful in
todays industry.
At GSF, we are able to offer things that
are not typically available on the second-
ary market for the smaller mortgage bro-
kers and mortgage bankers. For a small
correspondent who does $2-$3 million
per month in funding, to be provided live
security pricing, bid ask pricing and bulk
trade transactions is unique and not often
an option for that size of customer. As we
look to increase our servicing portfolio,
we have accomplished that goal through
hedging strategies typically reserved for
the most robust of customers.
No matter what division it is, whole-
sale, retail or correspondent, I think
each one of those provides a very
unique structure that is different than
what our competitors do.
My philosophy in getting the most
out of our sales staff is to compen-
sate commissioned employees on
the higher end of the scale.
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1. Go to www.ruralhomeloan.com
2. Pick a low xed rate for your borrower
3. Enjoy an easy closing, and then relax!
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Lending in TX, NM, and OK
Are there any books that have guided
your business philosophy?
I can sum all of our philosophy up with
two great books. One of them is Blue
Ocean Strategy, by W. Chan Kim and Renee
Mauborgne, which we use as our company
mantra ... the simultaneous pursuit of dif-
ferentiation and low cost. To summarize
the Blue Ocean Strategy or BOS, all of our
competitors are sharks, and we are com-
peting for the same customer. You can
resort to lowering your profitability or
increase operational staffing to accommo-
date faster turn times. You can compare
this competition between like companies
to sharks who are out there biting each
other. Pretty soon, we all compete right
into a non-profitable product. One compa-
ny will perform a transaction for a quarter
of a point less, while one will do same-day
closings ... all of those things take away
from profitability within your company.
You tend to follow the leader, so to speak,
when it comes to defining a business-part-
ner relationship.
We thought that moving outside of
this bloody, shark infested ocean and
into the blue ocean, swimming away
and doing something unique, would be
the key to our success.
The second book would be The Fred
Factor by Mark Sanborn, a great book that
defines customer service. If you can adopt
a business model that works around the
BOS and can provide customer service,
similar to what is described in The Fred
Factor, you are really guaranteed success.
Having worked at one of the countrys
top wholesalers, how have you taken
those experiences and business envi-
ronment, and moved it over to the
day-to-day operations of GSF Funding?
I was always in the top five percent
nationally from a production measure
while working with my former employ-
er. The successes that we had as a
wholesale branch directly resulted from
a customer service standpoint. Being a
self-proclaimed workaholic, I felt the
entire team shared the same dedication
to success as I did. We built our compa-
ny from the ground up, with customer
service being paramount to everything
else. If we could duplicate the service
and had increased flexibility and
maneuverability, success was inevitable.
To be honest with you, the only thing
I left behind was the challenge of mak-
ing change when change was due.
Whether it is environmental or econom-
ic, something always changes in the
mortgage industry. The only thing con-
sistent is change. As these issues came
up, such as downpayment assistance
going away, USDA capitalization issues,
the 2010 Good Faith Estimate (GFE) ...
those types of things that are radical
changes to the industry and to be able
make changes operationally on a dime
and quickly disseminate the new policy
or producer to our customer quickly.
To what do you attribute the success
of GSF Funding?
I find our success in beneficially melding
with our business partners. We learned a
lot from the successes of the large national
aggregators, and offered a lot of the tools
we have earned to our business partners,
we liken our company to a speedboat, large
aggregators are too big to adopt flexibility
in policy, they are the ocean liner that is
very slow to move and adapt to change. On
a dime, we are able to create policies and
procedures that aid in our success and to
the success of the wholesaler market. For
that, we feel that we earn some form of loy-
alty out of the broker industry.
Do you feel that brokers are more
loyal these days than they were dur-
ing the times of the industry boom?
Brokers are much more loyal nowadays.
From a competition standpoint, there is
less out there. You can earn business,
buy business or scare someone into
doing business with you. Some of the
larger aggregators employ the scare tac-
tic, rather than earn business from a
service standpoint. The fact that there is
less competition is the number one rea-
son contributing to the loyalty factor.
What specifically does GSF Funding
do to implement a partnership strat-
egy versus just having brokers?
We continually take care of our business
partners by giving them a hand up.
Whether it is creating collateral pieces they
can distribute to their referral sources, to
developing hedging strategies that allow
them to offer more aggressive pricing in a
longer-term lock period. In a purchase
transaction, you are typically dealing with
a 35-40 day lock, and we develop hedging
practices that allow them to fit more com-
fortably into that scenario.
Our ratio of purchases to refis is
extremely high. As a company, we do more
purchases than refis. Weve had a higher
purchase concentration over refis by help-
ing our business partners in developing
their purchase money marketing strategies.
I think that by doing more of a bulk
style transaction, this allows the business
partner the ability to spend more quality
time processing the file and less time
waiting for an underwriter to make a
decision on the file. They know that when
they deliver the file to us, they have guar-
anteed service they can expect. That all
lends to a better customer, higher pull-
through ratio, thus contributing to our
success and it takes out the environmen-
tal roller-coaster of highs and lows.
For those looking to join a growing
company through our professional
branch opportunity, we adopt the phi-
losophy that you can be in business for
yourself not by yourself.
I find our success in
beneficially melding with our
business partners.
No matter what you are, you
have a home wit h GSF Funding
and we are going to properly back
your loan and provide the tools
necessary to be successful in
todays industry.
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munity organizations. The questions
will also be published in a Federal
Register notice requesting public com-
ments, and information on the process
for submitting comments will be
included in that notice.
A well-functioning housing finance
system is critical to the long term stabil-
ity of the housing market, said U.S.
Department of the Treasury Secretary
Tim Geithner. Hearing from a wide
variety of perspectives as we embark on
this process is an important part of
establishing a more stable and sound
housing finance system for the
American people.
The Obama Administration will seek
input in two ways. First, the public will
have the opportunity to submit written
responses to the questions published
in the Federal Register online at
www.regulations.gov. Second, the
Administration intends to hold a series
of public forums across the country on
housing finance reform. Together,
these opportunities for input will give
the public the chance to deepen the
federal governments understanding
of the issues and to shape the policy
response going forward.
This open process will help shape
the future of our housing finance sys-
tem, said U.S. Housing & Urban
Development (HUD) Secretary Shaun
Donovan. The Obama Administration
is committed to engaging the public as
we consider proposals for reforming the
housing finance system in the context
of our broader housing policy goals,
and the best steps to get from where we
are today to a stronger housing finance
system.
This effort is both in keeping with
this Administrations commitment to
openness and transparency and the
Presidents Open Government Initiative.
This initiative represents a major
change in the way federal agencies
interact with the public by making
agency operations and data more trans-
parent and creating new ways for citi-
zens to have an active voice in their
government.
For more information, visit www.regula-
tions.gov.
Your turn
National Mortgage Professional Magazine
invites you to submit any information on
regulatory changes, legislative updates,
human interest stories or any other
newsworthy items pertaining to the
mortgage industry to the attention of:
NMP News Flash column
Phone #: (516) 409-5555
E-mail:
newsroom@nmpmediacorp.com
Note: Submissions sent via e-mail are
preferred. The deadline for submissions
is the 1st of the month prior to the target
issue.
petent, ethical appraiser. Regardless of
how many of these disciplinary actions
were fraud-related, these figures further
drive home the point that appraiser com-
petence and ethics are vital.
For more information, visit www.lexis-
nexis.com or www.marisolutions.com.
Federal Reserve to con-
sider changes to HMDA
The Federal Reserve
Board has announced
that it will hold four
public hearings, begin-
ning in July, on potential
revisions to Regulation
C, which implements the Home Mortgage
Disclosure Act (HMDA). The act requires
mortgage lenders to provide detailed
annual reports of their mortgage lending
activity to regulators and the public.
Consumers, community and consumer
organizations, mortgage lenders, and
other interested parties will be invited to
participate in the hearings.
The hearings will serve three objec-
tives: The Board will gather informa-
tion to evaluate whether the 2002 revi-
sions to Regulation C, which required
lenders to report mortgage pricing
data, helped provide useful and accu-
rate information about the mortgage
market; the hearings will provide infor-
mation that will help the Board assess
the need for additional data and other
improvements; and the hearings will
help identify emerging issues in the
mortgage market that may warrant
additional research.
The hearings will take place at the
Federal Reserve Bank of Atlanta on July
15, the Federal Reserve Bank of San
Francisco on August 5, the Federal
Reserve Bank of Chicago on Sept. 16,
and the Federal Reserve Board in
Washington, D.C. on Sept. 24.
All hearings will include panel dis-
cussions by invited speakers. Other
interested parties may deliver oral
statements of five minutes or less
during an open-mic question and
answer period. Written statements of
any length may be submitted for the
record.
For more information, visit www.feder-
alreserve.gov.
Obama Administration
seeking public input on
housing reform
The Obama Admin-
istration has released
questions for public
comment on the
future of the hous-
ing finance system, including Fannie
Mae and Freddie Mac, and the overall
role of the federal government in hous-
ing policy. The questions have been
designed to generate input from a wide
variety of constituents, including mar-
ket participants, industry groups, aca-
demic experts, and consumer and com-
news flash continued from page 15
Thursday, June 24, 2010
Friday, June 25, 2010
AAMB welcomes NAMB to beautiful Phoenix!
Come see the new NAMB President and the new
NAMB Board installation, while participating in some
great networking opportunities. State delegates can
also participate in the NAMB Delegate Council Meeting.
Phoenix Airport Marriott