Ready, set, go! The file management process begins as soon as each order is received. Dart assigns orders to the best matched appraiser based on file score - we do not broadcast orders. Each appraiser in our system is given a file score for each potential assignment. Scores are continuously updated based on the appraiser's ten most recent orders, and are comprised of quality, due date compliance, order acceptance, and proximity. The appraiser with the highest file score and no disqualifiers should be selected for the assignment. Our system sends that appraiser an assignment request immediately, and the appraiser has up to 6 business hours to accept or decline the assignment. (Our team contacts the appraiser if they have not responded within that time period.) If the appraiser declines, our team sends the assignment to the appraiser with the next highest file score. In cases where orders need to be manually assigned, our system provides file score information to our staff to utilize when assigning orders.
Once the order is accepted, the appraiser is provided with the property information along with entry contact information and any relevant documents (ex: purchase agreement). Dart includes a formal engagement letter with each order, detailing requirements for the product as well as any client-specific requirements. The appraiser is to reach out to the entry contact within 24 hours to schedule the inspection. Borrowers should be encouraged to take the first available appointment time the appraiser offers when possible. Appraisers are incredibly busy, especially this time of year, and avoiding any delays with scheduling the inspection will be beneficial to all parties.
The Inspection. Once the inspection date is set, the appraiser will create a preliminary list of comparables to use. (After the appraiser has viewed the property, the comps he planned on using might go right out the window.) A typical inspection can take anywhere from 10-30 minutes. Complex properties usually warrant a longer physical inspection time. The technology available to appraisers has greatly reduced the time spent physically inspecting properties. (Laser measuring devices, sketch applications and high-quality digital photography are just a few examples.) Besides not having to physically measure each room with a tape measure, appraisers also don't need to take as many notes since they can reference multiple photos of the home while back at their office. Some apps available also enter property data right into the report via tablet or laptop computer.
At Dart, our service level agreement with appraisers is that reports must be complete within 3 days of inspection. Once the completed report is received, our Quality Control team reviews the report before delivering to you, the client.
Tips for Borrowers. We asked some of our appraisers what, from the borrower's side, makes their job as easy as possible. A few of their responses were:
If the appraisal comes in low, and a formal Reconsideration of Value is submitted, it is best to avoid emotional appeals in your request. We understand that a mortgage transaction is incredibly personal to the borrower and seller, however the appraisal is based purely on data. Consider sending up to three, well-researched sales for the appraiser to consider in your request. Sales should be more similar than the comps used in the appraisal (not just the three most expensive nearby sales), and be located in the subject market. Remember, the appraiser is charged with creating an opinion of value. The value is what the home is worth, not the price that someone is willing to pay for it.
PERSON OF THE WEEK: Brian K. Fitzpatrick is president and CEO of LoanLogics Inc., which focuses on loan quality management and performance analytics technologies for the mortgage industry.
We recently checked in with him to get a sense of how technology, data and loan origination are intertwined in today’s lending environment.
Q: With the abundance of new technology being introduced to the mortgage industry in support of fully electronic originations, is there a lack of trust that has affected adoption? Why?
Fitzpatrick: There is a general lack of trust among lenders, which stems from the industry’s huge data integrity problem. Loan officers and mortgage companies collect a lot of information from borrowers, including asset, income and bank account information – and then they collect more information so they can confirm what the borrower said on the application. Soon you’re dealing with an increasing number of partners, documents and data. The more information that is gathered, the more likely you are to get conflicting information, and then your data starts to cross-contaminate.
Simply moving toward electronic originations does not necessarily fix a lender’s data integrity problem. For example, instead of using smart docs, many lenders are taking documents that were signed electronically and turning them into “dumb documents,” which are just images of electronically signed documents. Basically, you have these hybrid type of documents, which makes it harder to verify and validate the data on them unless you have the proper tools.
Q: Do some lenders fall back on manual operations simply because they don’t trust technology? How pervasive do you believe this is?
Fitzpatrick: Yes, many lenders are clinging to manual processes because they can’t trust their technology to ensure data integrity. You only have to look at the MBA’s statistics on per-loan costs to see how pervasive it is. The average loan underwriter is stuck working on approximately 1.5 loans per day because they can’t always trust the accuracy of the data – they are spending most of their time reviewing documents and all the data in those documents. However, a growing number of lenders are starting to see that technology can help by showing all the data at once, so they can more easily identify the risks.
Q: What misconceptions do lenders currently hold about technology that add to the problem?
Fitzpatrick: Right now, there’s a perception that the digital mortgage experience and point-of-sale technologies will solve everybody’s problems. While it may be making the borrower’s experience better, in many cases, it’s making the industry’s data integrity problem even worse.
While lenders are providing a digital mortgage experience to borrowers on the front end, many are still using an older system on the back end. The older system uses a different data model and rules, so lenders can’t validate or verify all the data that borrowers are submitting. At the extreme, some lenders are even taking the information the borrower submits and retyping it into their LOS. It’s like putting lipstick on a pig – plus it invites bad data.
Another misconception is that the LOS is the sole source of truth. There is a distinction between a source of truth that spans multiple systems and documents and a system of record that ultimately can house that information. I can take garbage and put it in my LOS, so the information is in the file, but it is still garbage. That’s why there is such a huge need for lenders to continually validate and verify data across systems and documents, and then to update that information in their LOS. We’ve worked on loans from lenders using all the various LOS vendors. They are plagued equally by data defects that are propagated through the origination process.
Q: What can technology vendors do to ease those concerns?
Fitzpatrick: Lenders need a certain level of comfort when it comes to data. The key is to make sure the data is accurate by validating and verifying it both in real time and throughout the mortgage process.
For example, if a borrower must show he has $30,000 in funds for a down payment, the lender is going to ask for a bank statement. Today, it’s very easy to create a fake paper bank statement that looks real; you can’t tell the difference between the fake statement and the real statement. But if the borrower gives the lender permission to check the data electronically through the borrower’s bank, nobody can tamper with the information.
Could someone tinker with the data once it’s in the system? Sure, but that’s why you continue to validate and verify the data. Underwriters are suspicious by nature – after all, it’s their job to assess risk.
Q: What is it about the mortgage process that consistently creates loan defects, and what should lenders be doing about that?
Fitzpatrick: This gets back to what I was saying earlier about the increasing amount of data from various sources that goes into the loan file. The main culprit behind loan defects is simple human error and the retyping of information or information being corrected during a closing and not making its way back to the system of record. Because the mortgage process is so disconnected, with many different partners, many different handoffs of data and many different processes, it’s feasible that people are retyping information several times during the course of the transaction.
For example, my wife and I recently refinanced our home. When we got the appraisal back, I noticed that the order was correct, but my name was spelled with a “y” – plus the street name and my wife’s name was spelled wrong. Of course, I didn’t misspell my name or my wife’s name and the name of my street when I applied for the loan. Somebody had to retype it into a different system when actually ordering the appraisal, or someone at the appraisal company did it. Every time that happens, it increases the likelihood of contaminated data in the file.
Q: Is the constant stream of new regulations and investor demands for better quality loans to blame, and if so, why can’t technology seem to keep up with them?
Fitzpatrick: Blaming new mortgage regulations and other requirements is like saying the county health department is bad for the restaurant business. Before we had health inspectors, a lot more people were getting sick. When we created regulations, restaurants were forced to improve their equipment. New technologies and processes to ensure food safety played a role. It not only made consumers healthier, but restaurants were also able to avoid problems that could have put them out of business.
Regulations are also making our industry easier for consumers to understand. My wife, who formerly ran compliance for a large lender pre TRID, recently saw TRID documents for the first time and was amazed at how simple they were to read and understand.
I don’t agree with the idea that technology cannot keep up with our industry’s regulations and requirements. If a lender is relying on their LOS for compliance – remembering that the LOS is a system of record, not the source of truth – then yes, you will have problems because of the rampant data contamination that is pervasive throughout the origination process.
But there are tools that enable lenders to pull data from any source, validate and verify it, and run it through an automated rules engine that can be called from system, whether it’s an LOS or a point-of -sale system. There will always be those who blame their circumstances on industry regulations, but that’s not the issue. The issue is data integrity and consistency of rules and workflow to automate processes across the enterprise. If we focus on solving that problem, everything else will fall into place.
Article from MortgageOrb.com.
Compliance Hot Topic: Adverse Action Notice Requirements under the ECOA
When are we required to provide an adverse action notice under ECOA?
In answering this question it is important to understand the definition of an application for Equal Credit Opportunity Act (“ECOA”) purposes. Under Regulation B, the implementing regulation to ECOA, an “application” means an oral or written request for an extension of credit made in accordance with procedures used by a creditor for the type of credit requested. Thus, for ECOA, if a creditor obtained enough information to make a credit decision and it has been submitted in a format normally used by the creditor, the creditor must treat this as an application.
With regard to adverse action notices, Regulation B requires a creditor to provide an adverse action notice in the following instances:
• If the creditor takes adverse action on a completed credit application, the creditor must provide an adverse action notice within 30 days of receiving the complete credit application;
• If the creditor takes adverse action on an incomplete credit application, the creditor must provide an adverse action notice within 30 days of receiving the incomplete credit application;
• If a creditor takes adverse action on an existing credit account, the creditor must provide an adverse action notice within 30 days of taking action on the credit account; or
• If a creditor makes a counteroffer to a credit application and the applicant does not accept the counteroffer, the creditor could either provide a combined counteroffer and adverse action notice at the time of the counteroffer or send a separate adverse action notice within 90 days of making the counteroffer if the applicant does not accept the counteroffer.
As an example, if a creditor pulls a credit report on an applicant and determines based on consumer’s FICO score that they would not qualify for a loan and relays this information to the consumer or otherwise discourages the consumer from proceeding with a loan application, the creditor must issue an adverse action notice to the consumer within 30 days.
June is National Homeownership Month!
In 2002, President George W. Bush proclaimed June to be National Homeownership Month, during which he encouraged all Americans to achieve the American Dream by learning more about financial management and exploring homeownership opportunities in their communities.
Without a doubt, homeownership is a cornerstone of our economy and can significantly contribute to the quality of life to individuals and to the vibrancy of their communities. Here are just a few reasons to celebrate homeownership, and to encourage healthy homeownership rates in our neighborhoods, towns and cities.
America needs homeownership to build communities, provide generational wealth, encourage educational advancement, sustain job growth, and deliver on the dream of hope and prosperity. Your AHA is proud to be the first-ever national alliance representing the exclusive interests of homeowners and aspiring homeowners, and will continue to work the policymakers to promote sustainable homeownership in all segments of America.
Wintrust Mortgage is partnering with Chicagoland Habitat for Humanity to build more affordable housing in the Chicago area.
Through the partnership, Wintrust will provide $40 million in below market rate mortgages for affordable housing.
The Chicago Tribune has the details:
The new program, set to launch July 1, is a departure for Chicagoland Habitat and its eight Chicago-area affiliates, which previously financed and serviced homeowners directly through zero-interest loans.
The Wintrust investment will finance about 250 Habitat homes over the next four years, nearly doubling the projected number of affordable new and rehabbed homes to be made available in the city and suburbs.
According to the article, Chicagoland Habitat’s annual budget is $16 million, and $10 million of that goes to building new homes. Wintrust’s $40 million will help the nonprofit build another 60 homes per year.
For more on the story from the Chicago Tribune, click here.
Source: Chicago Tribune; HousingWire.com
Check out the new episode of America’s Mortgage News presented by Credit Plus that takes a close look at some of the proposed changes the Trump administration may make that could have a significant impact on industry regulations, interest rates and the economy. As you may know, on June 8, the House of Representatives passed The Financial CHOICE Act that, in its current form, would dramatically amend the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, and change the future of financial regulation. In this edition, we review what these proposed reforms may entail and the possible outcomes.
Scotsman Guide released their fifth annual Top Mortgage Lenders rankings of the nation's top-producing mortgage companies. Top Mortgage Lenders is the mortgage industry's most comprehensive, most intensely verified list of its kind. The lists appear in the June 2017 residential edition of Scotsman Guide. To view the lists and rankings online, click here!
The Mortgage Collaborative congratulates our lender members that made Scotsman Guide's list of 2016 Top Mortgage Lenders!
Overall Volume (Top 75)
#11 Prime Lending
#12 Plaza Home Mortgage
#13 Movement Mortgage
#14 New American Funding
#18 American Pacific Mortgage
#26 RPM Mortgage
#37 FBC Mortgage
#38 George Mason Mortgage
#57 Northpointe Bank
#58 Waterstone Mortgage
#66 Nations Lending Corp.
#67 LeaderOne Financial
Top Retail Volume (Top 25)
#6 Prime Lending
#10 Movement Mortgage
#11 New American Funding
#12 American Pacific Mortgage
#17 RPM Mortgage
#23 George Mason Mortgage
Top Wholesale Volume (Top 25)
#4 Plaza Home Mortgage
#18 FBC Mortgage
#23 Michigan Mutual (dba MiMutual Mortgage)
Top Correspondent Volume (Top 10)
#5 Plaza Home Mortgage
Top Volume Gain (2015 to 2016) (Top 10)
#9 Movement Mortgage
For more information on Scotsman Guide, contact Aireal Hart.
HousingWire released their 2017 class of Rising Stars, highlighting 40 young luminaries transforming mortgage finance.
The 2017 Rising Stars represent the best young leaders in the mortgage industry in lending, servicing, investing and real estate. Many of the winners are leading their companies in making strategic decisions for their organizations and developing new and inventive ways to get things done.
Others are contributing through innovation, product development, enhancing processes and data analysis. Across the board, their efforts are transforming the industry.
The Mortgage Collaborative would like to acknowledge those recipients selected from our Preferred Partner companies & Strategic Alliance partners:
Congratulations to all recipients!
Article originally posted through the Mortgage Bankers Association of America - MBA Insights. Article by Lori Brewer, Founder & President of LBA Ware.
Loan originator compensation is complex. Despite the Consumer Financial Protection Bureau's 2014 changes to loan originator compensation requirements under the Truth in Lending Act (Regulation Z), there is still tremendous flexibility in how lenders can legally compensate their LOs.
This flexibility is crucial for lenders looking to attract and/or retain top talent. However, without a proper system in place to manage the myriad of compensation plans a lender may have in place, pay day can easily turn into a nightmare for the payroll department and LOs.
In a recent survey conducted by mortgage technology vendor Floify, compensation is the third-most important factor LOs consider when evaluating a lender for an employment opportunity (1). With compensation rating that high on an LO's list of criteria for a potential employer, it is critical for lenders to be able to offer a new LO a compensation plan tailored to that LO's desires...and within reason, of course.
While LOs have traditionally been paid on commission only, many lenders have begun offering new LOs a minimum guaranteed salary during the initial onboarding period (usually two to four months). From there, some companies simply write off the salary as a cost of onboarding a new employee, while others recover that salary out of the LOs future commissions in what is known as a recoverable draw. In addition, many lenders use this methodology to recoup other LO expenses, like subscription fees for third-party applications, salaries for an LO's assistant or marketing expenses.
Keeping a real-time, accurate accounting of an LO's draw balance would be challenging in the best of circumstances, but there are other compensation factors at play that must be accounted for in the calculation of commission. Basis points per loan remains the rate at which most LO commission is calculated, but where lenders have gotten creative is by layering on additional criteria to create the compensation structure. These criteria include:
--Referral source (self-generated, branch, marketing campaign, builder)
--Quality of loan files submitted
--Loan Purpose (purchase, refinance, construction)
-Metropolitan Statistical Area*
*These last two are ones in which lenders need to exert particular care in how they apply them in a compensation plan, lest they run afoul of Fair Lending rules.
Regarding loan type, many lenders have chosen to create salaried positions in which the LO only originates less-profitable products like reverse mortgages, Home Equity Lines of Credit, bond-funded loans and construction loans to avoid having to pay out more in commission than the loan will ultimately bring in profit. This is permissible. What lenders cannot do is incentivize LOs monetarily for one loan type over another, as this could imply that the lender is encouraging their LOs to target specific borrowers to the exclusion of others and would be a violation of the Fair Lending rules.
It's been a long-accepted practice for multi-state lenders to allow market conditions to dictate compensation for LOs and branches located in different states, but market conditions can also vary across, or even within MSAs. As such, some lenders are offering different compensation based on the MSA where the LO or branch is located, and others are even segmenting compensation based on market conditions within segments of an MSA.
In these instances, lenders must be sure to thoroughly document the reason behind the differentiation to avoid the implication of redlining, which is verboten under Fair Lending rules. Lenders would also be wise to seek a legal opinion on this type of compensation criteria, just to ensure they have a legally defensible position, should questions ever arise.
Nonetheless, even with the guardrails that the LO Comp and Fair Lending rules provide, there is still tremendous room for flexibility in designing an LO comp plan. According to the latest data from the Conference of State Bank Supervisors, there are roughly 145,253 mortgage loan originators licensed through the Nationwide Mortgage Licensing System (2). That is a lot of compensation plans to track, even if the plans are similar in nature, because each LO's pipeline is going to vary, and those variances are what make LO comp such a complex function.
As is often the case when there is a set of data to track, lenders tend to fall back on the old stand-by--spreadsheets. However, LO comp is an area in which spreadsheets simply don't cut it. While spreadsheets allow HR and payroll to track the data points that ultimately determine an LOs compensation, there are few efficiencies gained using this method.
Not only do spreadsheets prevent LOs from having a real-time estimate of their compensation, it also requires tremendous amounts of effort from the HR/payroll team on a nearly daily basis to so that, come payday, everyone's paycheck is accurate. In some cases, lenders will have multiple payroll personnel, each assigned to a different region, and because of the complexity of their various LO comp schemes, those employees may have to spend multiple days on site at each branch in their region during every pay period to ensure compensation is calculated correctly.
If there was ever a case to be made for automation, this is it. By using an automated system designed specifically to track compensation, lenders can streamline their back-office operations while remaining both compliant and creative in terms of their overall compensation schemes--all of which enables lenders to remain competitive when attracting and retaining LO talent.
Who says you can't have it all?
1. Floify, 2016 Loan Officer Recruitment and Retention Study: State of mortgage industry loan officer attrition and retention, p. 12, November 2016, https://floify.com/blog/announcing-2016-loan-officer-recruiting-retention-study.
2. 2016 NMLS Mortgage Industry Report, p. 3, March 20, 2017, http://mortgage.nationwidelicensingsystem.org/about/Reports/2016 Mortgage Report.pdf.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)
TMC - Chief Operating Officer