Today’s Lending Insight 1

3 Beyond ImagingMike Bridges of PaperClip talks

about how electronic processes and not just imaging saves money.

4 It’s About TimeTim Anderson of DocMagic offers

up his take on the electronic closing pilot that the CFPB announced.

5 “E” CommunicationRandy Schmidt of Data-Vision

discusses how communicating with the borrower in an “e” way improves the process.

6 Up To The TaskAlan Harris, the founder of IRIS

Corp., details why some vendors may not be ready to transition lenders to “e” processes.

7 Open Your MindTony Garritano sheds some light

on how mortgage lenders need to be more open minded to be successful.

9 Execute Your VisionMichael Hammond of NexLevel

Advisors talks about how you can execute on your vision to advance your company.

10 Three TipsTalk show host David Lykken

stresses three things that every LO needs to know in order to thrive these days.

11 Vendor OversightJennifer Miller of a la mode, inc.,

takes a hard look at effective third-party oversight strategies that work.

New Risk Management Strategies BY JOY HOU

The proliferation of technology in the mortgage industry has led to significant benefits for all parties, and the application of certain technologies can improve mortgage risk management. However, the adoption and use of technology has been fragmented.

As a director of a ma-jor global lending institu-tion in 2008, I saw first-hand how fragmented or inadequate technol-ogy practices helped contribute to the eco-

nomic downturn.Getting data and intelligence in a timely

manner proved to be impossible: loss re-ports did not come in on time, origination documents were not tied back to the de-cision-making data, and established un-derwriting criteria were not applied.

INSIDE TODAY’S LENDING INSIGHT

today’s

The Inconvenient Truths BY PHILL HALL

If you were paying attention to the ABC News program “This Week with George Stephanopoulos” on April 27, you witnessed a bit of clumsy side-stepping by the senior senator from Massachusetts, Elizabeth Warren. During the program, Stephanopoulos pointed out Hillary Clinton’s record of favoring the financial services world over consumer rights, and asked

whether a President Hillary Clinton would be too friendly to the banking world.This is, verbatim, what Warren had to say: “I’m worried a lot about power in the financial

services industry and I’m worried about the fact that basically, starting in the ‘80s, you know, the cops were taken off the beat in financial services. These guys were allowed to just paint a bull’s-eye on the backside of American families. They loaded up on risk. They crushed the economy. They got bailed out. What bothers me now, they still strut around Washington, they block regulations that they don’t want, they roll over agencies whenever they can.”

Overcoming Regulatory Burdens BY DENNIS HARDIMAN

In today’s heightened reg-ulatory environment, finan-cial institutions are experi-encing difficulty as a result of strict compliance require-ments. With the CFPB mortgage guidelines exceeding more than 900 pages, communi-ty banks are feeling inadequate to make the adjustments necessary to remain compliant, forcing some out of the mortgage business entirely. In this challenging environment, many institutions are increasingly outsourcing their mortgage operations, but this can be danger-ous if not done carefully. With the right ap-proach however, community institutions can cost-effectively maintain regulatory compli-ance and stay in the mortgage game.

The ever-evolving CFPB guidelines require lenders to continuously be up-to-date in order to avoid severe penal-ties, and failure to meet new guidelines can be damaging to your bank’s reputation and costly.

Collect More Data … Are You Crazy?BY REBECCA WALZAK

Ensuring all required data is Recently there has been a push by the CFPB to require lenders to collect more data and report it as part of their yearly HMDA filing. A lot of this data is borrower specific data that is sensitive to their privacy, yet the federal government feels it is needed to better monitor lenders. Really?

TAKING YOU BEYOND THE NEWS

JUNE 2014

on page 14on page 13

on page 12

on page 15

Brought to you by PROGRESS In Lending

1-800-434-7260www.MercuryVMP.com

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Compliance guidelines: The Gramm-Leach-Bliley (GLB)Actwww.MercuryVMP.com/GLBA

Dodd-Frank and Appraisals: The Compliance Strategy

An in-depth look with a list of common pitfalls to avoidwww.MercuryVMP.com/DFA

Appraisal Quality Control: Best Practices from the Experts

Step-by-step guide to QC process with 10 warning signswww.MercuryVMP.com/QC

Who’s Your Technology Partner? Why It Matters.

How to get peace of mind with your technology choiceswww.MercuryVMP.com/TS

Appraisal issues? Download these free industry resources from Mercury Network

Untitled-1 2 8/13/13 12:16 PM

Tony Garritano, EditorMichael Hammond, Executive Editor

Roger Gudobba, Senior EditorJanice Cordner, Creative Director

Miguel Romero, Photo Art Director

CONTRIBUTORS:(in alphabetical order)

Tim AndersonMike Bridges

Phil HallDennis Hardiman

Alan HarrisJoy Hou

David LykkenJennifer Miller

Randy SchmidtRebecca Walzak

Tough TimesIn a report, CoreLogic economists, led by Chief Economist Dr. Mark

Fleming, analyze the current housing market conditions, including why home sales are not increasing, in part, because of limited inventory of de-sirable homes and buyers not finding what they want to purchase.

Key findings in the CoreLogic May MarketPulse include: >> Cash is all the rage in the purchase of condominiums. As of January

2014, Florida and Nevada had the highest U.S. cash sales share for con-dos, with shares of 81.2 percent and 80.5 percent respectively.

>> The U.S. Census Bureau, the National Association of Realtors and the Mortgage Bankers Association all indicated that March home sales slowed further, emphasizing the lack of available inventory could be to blame.

If we analyze the situation further, home sales fell by 2 percent year over year in April 2014 to a non-seasonally adjusted annual sales pace of 5.10 million, 0.5 percent higher than the 5.07 million pace reported for March 2014. Despite the decrease in total home sales, sales of existing homes increased by 10 per-cent year over year and sales of newly constructed homes increased by 7 percent. The decrease in home sales came from distressed sales, which fell by 50 percent year over year.

After reaching a trough in August of 2013 of 375,000 properties, the number of real estate owned (REO) prop-erties increased 15 percent to 430,000 as of March 2014. The increase in REO properties was broad based, rising in 46 states. While the increase was moderate na-tionally, some states had large increases. Idaho led the way with the stock of REO properties nearly doubling between August 2013 and March 2014.

I think we can all agree that these are tough times for the mortgage industry.

JUNE 2013

OUR LENDER BOARD

Tomorrow’s Mortgage Executive magazine is a monthly publication distributed online at www.progressinlending.com. The mission of the publication is to provide one place where people who believe technology strategies can solve pressing mortgage problems can express their ideas. The magazine was designed to be a vehicle to create conversations that will move the mortgage industry forward. As such, the information found in this publication is all about thought leadership and should not be interpreted as recommendations coming from the publisher. We are here to give our contributors a voice. All materials found in this magazine are not guaranteed for accuracy and the publisher is not liable for any damages, losses or other detriment that may result from the use of these ideas. © 2012 Tomorrow’s Mortgage Executive. All rights reserved.

EXECUTIVE TEAMTony GarritanoFounder and ChairmanRoger GudobbaChief Executive OfficerMichael HammondChief Strategy OfficerKelly PurcellChief information OfficerGabe MintonChief Technology OfficerSteven HorneChief Operating OfficerMolly DowdyChief Marketing Officer

Lending Laughs

Distributed by

Today’s Lending Insight 3

Imaging remains the most dominate electronic format for eliminating paper. Paper cost $1.30 per page cradle to grave. Paper scanned to image cost ~ $0.30 per page. By scanning paper as soon as you can, will save a dollar per page.

E-Signing never produces paper and in the mortgage industry, its application can make for a paperless transaction. Adoption of E-Signing or E-Closing remains in single digits. In addition, most of the paperwork that produced the underwriting to closing

process came in as paper, faxed or imaged and is sent via email.

One of the biggest challenges E-Signing has had to face is non-reputation whereby the electronic document is secured in such a way that if tampered with, it can quickly be determined.

Imaged documents should have the same process ensuring that if altered it too can be quickly determined. E-Signed or imaged, contract documents must be securely managed from criminals working identity thief as well as remaining above reproach for originally.

Best practices for maintaining images can go far beyond just protecting them; let’s see what else can be done.

PaperClip provides two applications for imaged documents

with tremendous efficiency gains. PaperClip develops Document Recognition technology where it “Finger Prints” every page just like CSI. Therefore if pages are questioned, they are submitted to the Finger Print Library and quickly identified to who they belong to (associated metadata).

Closing Event – PaperClip captures the closing documents on their way out the door to the closing table. This big PDF closing document is then finger printed and stored. After the closing when the documents are scanned, PaperClip can compare it with the original PDF and identify whom it belongs to, missing pages, re assemble pages for the desired stacking order and detect some fraud all before it reaches post-closing and servicing.

Secondary Market – When these loans are bundled for selling into the Secondary Market, both the seller and buyer can collect the necessary documents and present them to the original pages ensuring the buyer has the original documentation supporting the loan. In addition, reports can be generated on what documents or pages are missing.

Electronic document manage has a role in reducing cost and process improvements. Remember, we can process electrons better, faster and cheaper than atoms.

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ABOUT THE AUTHORSince 1995, Mike has served as President, Vice President of Marketing & Sales, Director of Professional Services, and Consultant for PaperClip Software. In his current role, he is responsible for strategic direction, operations, and corporate communications. Prior to joining PaperClip Software, Mike was the Executive Vice President and co-founder of CMF Design System, a custom software and systems integration firm. Mike received a Bachelor of Science from Rowan University and served as a Captain in the United States Marine Corps.

4 Today’s Lending Insight

On Wednesday, April 8 I received an official invitation to attend the CFPB hosted panel discussion on looking at better ways to improve the

closing process at CFPB’s HQ office in DC. As I was sitting listening to all the government agencies sign-on in support of this initiative, I was having a sort of surreal out of body experience. It was June 28, 2002 when FannieMae published bulletin 02-08 announcing they would now begin purchasing this

thing called SMART Doc eNotes. It was then that I became a bonifide convert and believer that this was going to revolutionize the way we

do business and went in search of a doc company to develop and offer the solution.

What I didn’t know at that time was just how long this was going to take. During the meeting, Ann Epstein, Director of Change Management at Freddie Mac jokingly quipped, “eMortgage adoption has only been

three to five years away for some time now” which was an insider joke since that line has been used and quoted so many times over the years. The real joke being we just didn’t know which three- to five-year period this actually was going to become a reality. Well, after twelve years of talking and promoting this, last Wednesday was the culmination of what I thought at times was a singular effort to evangelize and educate people on a better way to do business. I oftentimes felt like Don Quixote casting stones at windmills. As I expressed my joy to some of the other “old timers” who were in the room and drank the cool-aid early, “I’m just happy to be around to see it finally happen!”NO MORE EXCUSES

As with any new change or innovation there will always be foot draggers, naysayers and skeptics but with the new Integrated Disclosure reg effective August 1, 2015 there really is no longer a choice. I just don’t see how any lender can meet these new requirements and be in compliance of notifying and tracking acceptance by borrowers by maintaining old paper based processes and files to prove compliance.

If you look at the result of the numerous lawsuits on the servicing side culminating in the $25 Billion National Mortgage Settlement, (this was just one of many) it wasn’t just because of the infamous

“robo-signing” (which eNotary would eliminate) but it highlighted the inherent problem with using paper files to document defense of replicating a transaction that occurred years before. They were missing signatures, key disclosure and note documents, sometimes they had multiple versions, incomplete or incorrect filings and the list goes on and on. SUPPORTING A TRUE ELECTRONIC PROCESS

From the ability to provide a full electronic (date & time stamp) audit trail of who, what, why and when everything occurred on the loan from application to closing and beyond, to the ability to associate and authenticate virtually ALL parties in the transaction and control who does what in the signing and review process, with “e” the entire process is more transparent, compliant and secure. The added benefit of retaining the electronic evidence for ALL parties to show “proof” of compliance is just icing on the cake.

From that day in 2002 I was bitten by the eMortgage bug and in the words of famed prophet and visionary Homer Simpson, I say to you now: “What took you so long?”

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ABOUT THE AUTHORDuring his career, Tim Anderson has been involved in many aspects of the mortgage industry and has acquired more than 30 years of mortgage and technology experience. Most recently, he has been heavily involved on the technology side of the industry, where he played an instrumental role in developing one of the first e-mortgage platforms, including e-signature and e-vaulting technologies. At DocMagic, Tim is the head of the firm’s eServices Division where he spearheads future “e” initiatives at DocMagic.

Today’s Lending Insight 5

Recently, the Consumer Financial Protection Bureau announced a new electronic closing pilot program to allow consumers the ability to review mortgage documents prior to reaching the closing table. This follows closely on the heels of changes to Regulation B back

in January that required lenders to provide borrowers copies of appraisals or other written valuations promptly upon completion. Add these to the existing regulations requiring documents to be delivered to the borrower within three days of application, and it seems that you

are being asked to send information to your borrower at every turn.

The intent of these regulations isn’t to just provide borrowers with the appropriate documents, but to give them time to review, analyze and ask questions. The last thing anyone wants is for the borrower to be surprised when they get to the closing table. An informed borrower is a happy borrower.

So how exactly do you accomplish this? The answer is with a secure communication platform. A secure communication platform allows you to not only deliver documents to the borrower throughout the entire loan process, but also allows for the borrower to securely ask questions and return documents back to you if needed.

When considering a secure communication platform, there are several things to consider. The first of course is security. While many lenders would never consider sending sensitive information via e-mail, it is amazing how many sensitive documents are delivered back to lenders in this manner. Paystubs, W-2’s and previous year’s tax returns all contain information that should never be sent via e-mail. Unfortunately, many borrowers have no other option of delivering this information back to the lender.

The next thing to consider is availability. Today’s borrowers are always on the go. For any communication platform to be effective, it must be able to be accessed via mobile devices. By making sure that your platform is mobile ready, you are assured that you can always reach your client, and more importantly, they can always reach you.

Workflow is another factor to look for in a communication platform. What happens if a request goes unanswered? What if the borrower doesn’t consent to receiving their documents electronically? To stay compliant with all of the regulations it is very important to be notified when manual intervention may be required.

The last, but definitely not the least, thing to look for is a complete audit trail. Being able to produce proof positive that documents were delivered on time and that all ESIGN requirements were met, along with a history of messages exchanged between lender and borrower will keep you in good graces with your auditors.

As I mentioned earlier, lenders are being asked to deliver information to borrowers at every turn. By installing a secure communication platform you can not only meet both the letter and intent of these regulatory requirements, but make the entire loan process faster and smoother for the borrower.

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ABOUT THE AUTHORRandy Schmidt is President of Data-Vision, Inc. and is responsible for overall operation and strategic planning for the company. Randy became involved in the IT side of mortgage banking almost 30 years ago and has been involved in numerous projects on both the origination and servicing side of the business. In 1993, Randy co-founded Data-Vision, Inc., in Mishawaka, Ind. as a Web design company.

Borrower Communication COMES OF AGE

6 Today’s Lending Insight

The residential real estate finance industry has struggled with ‘e’ for years. Efforts to move from paper introduced microfilm, microfiche, imaging, Optical Character Recognition (OCR), and scanning. All come with their own cost, infrastructure, deployment, storage, retrieval and indexing headaches. This was further complicated with the introduction of an ‘e’ or digital signature component. Everyone understood the benefits of ‘e’, but this type of process change was going to require resource and time investments allocated at a cost to more immediate wants and needs. For the interim, ‘e’ would wait.

When the E-Sign Act was signed by President Clinton in 2000, the real estate industry didn’t take

much notice. There really wasn’t any reason to modify existing processes and frankly mainstream technology wasn’t available to institute ‘e’ save for the memorialization of a signature in an e-mail. The industry has danced with some ‘e’ success, e-disclosures (boiled down pdf documents sent through e-mail, i.e. ‘paperless’), evolving to attestation of those documents through a signing room where the recipient stumbles

through an authentication process, to ‘sign’ the documents, which are then delivered back to a ‘eVault’ for storage, which can be retrieved as .pdf documents.

There has been success in delivering eNotes electronically, with little enthusiasm. To date 321,559 e-Notes have been registered and delivered electronically to the investor. The adoption of ‘e’ has been lethargic at best, but in reality pathetic. ‘e’ will shortly become the required standard and best practice, because drivers are in place to force the process change. They may look like the same old drivers

the mortgage industry has been marching to over the years. But the reasons and structure are changed.

There are three drivers, which will force the industry to move to

a fully enabled ‘e’ transactions, from the purchase of a home to the delivery of the collateral to the secondary market. Yes, I said Home Purchase to Delivery. What does purchasing a home have to do with collateral delivery? Financing. It is the contention of the author that ‘e’ starts at the beginning and the beginning is different for purchase and refinance transactions.

>> Fraud – Fraud breeds regulation. Each iteration of regulation begets more data to combat fraud. These two components ultimately force the industry to adapt rigor, which guarantees transactions, ‘are what they are’. The industry needs to provide sustainable, accurate and verifiable data elements, end to end, from the inception of the transaction; regardless where that is, purchase or refinance to delivery.

>> Audience – As we move from the Greatest Generation through the Baby Boomers. The X and Y Gens occupy the market place, they are tech centric and their culture is to obsolete ideas over and over.

>> Technology – Those partners who deliver the most user friendly, least obtrusive, e-solution will gain the most acceptance, faster.

See where I’m coming from? Going forward I’ll look at each of these items and discuss how they’ll contribute to a more ‘e’ mortgage world. Stay tuned …

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Mech300_QuestSoft_PiL_Full-pg-Ad_140131.pdf 1 1/31/2014 10:36:52 AM

ABOUT THE AUTHORAlan Harris is the founder of IRIS Corporation and is a designated Certified Mortgage Banker, (CMB), with 25+ years’ experience in the real estate finance industry. He started in loan origination, servicing operations and system administration. Subsequently moving to Change Management, Process Re-engineering, System Integration and ‘e’ Implementation. Alan has ‘backend’ and/or User Interface ‘hands-on’ experience with the many Loan Origination and leading Servicing systems, managing integration or implementation of those platforms.

CAN TRADITIONAL MORTGAGE TECHNOLOGY PROVIDERS ADDRESS

‘E’?They may look like the same old drivers the mortgage industry has been marching to over the years. But the reasons and structure are changed.

Today’s Lending Insight 7

The announcement by the CFPB to engage in an electronic clos-ing pilot has some in the industry cheering and others crying foul. Those that are cheering see this as the natural extension of where the mortgage industry needs to go. Full electronic mortgages are the future. Those that are crying foul don’t nec-essarily disagree, but feel that the government shouldn’t dictate how electronic closings are done and in-stead lenders should be allowed to embrace electronic mortgage pro-cesses on their own.

Here’s how I see it: I’m a fan of musical theater, so I’m going to present two musical scenarios. First, my son just finished perform-ing Seussical. The play’s story is a

rather complex amalgamation of many of Dr. Seuss’s most famous books. After a Broadway run, the production spawned two U.S. na-tional tours and a UK tour. It has be-come a favorite for school, commu-nity and regional theatres.

In the play the Whos are tiny crea-tures that live on a small speck of dust. Horton the Elephant is the only one that can hear them and pro-tects them by placing their world, the small speck of dust, on a clover. The problem is that everyone thinks Horton is crazy because he talks to a small speck of dust. Horton is put on trial and is remanded to a jail for the criminally insane and the small speck of dust is set to be boiled.

Have no fear, this story has a

happy ending. Jojo, the mayor of the Whos’ child, comes up with a new word and a creative way to am-plify his voice so now everyone can

hear the Whos on the small speck of dust. So, Horton doesn’t end up in jail and the Whos are saved thanks

to the ingenuity of a small child who dares to think outside of the box.

Now, let’s switch gears, and talk about another famous musical. In the musical thriller Sweeney Todd: The Demon Barber of Fleet Street, the story doesn’t end as well. In this play a man’s wife and child is ripped away from him by an evil judge. Todd returns to town to get revenge. He poses as a barber, only instead of just shaving his clients, he slits their throats. The end goal is for Todd to get the judge in his barber chair. Eventually Todd does get his revenge and kills the horri-ble judge, but it comes at a cost. A young orphan called Toby kills Todd because Todd killed Mrs. Lovett, a woman that Toby came to regard as a mother figure.

What does all of this mean for the mortgage industry exactly? In Sweeney Todd we see what hap-pens to characters that for whatever reason can’t progress beyond their primal urges. Vengeance begets more vengeance and most of the characters end up dead. To the con-trary, in Seussical everyone is saved and lives happily ever after because one character was able to think cre-atively, which causes the other char-acters to open their minds.

If the CFPB sits back and does nothing, most lenders have exhib-ited little to no interest in advancing their process. So, the CFPB is com-ing in, trying to look at the process differently and come up with real im-provements that will benefit every-one, borrows, lenders and investors alike. I talked to a lender at a recent trade show and he said that it’s un-fortunate that the CFPB has to step in and do this electronic closing pilot because electronic closings should be pushed by the private sector, but in the absence of the private sec-tor acting, this lender welcomed the CFPB’s involved because they are actually filling a void.

I could not agree more. Electronic closing should be mainstream by now because electronic closings re-ally aren’t new, it’s just that they are not being done. I would rather the musical of the mortgage industry end more like Seussical where every-one benefits from being creative vs. Sweeney Todd where everyone ends up dead because they never seek to expand their way of thinking.

ABOUT THE AUTHORTony Garritano is Chairman and Founder of PROGRESS in Lending. As a speaker Tony has worked hard to inform executives about how technology should be a tool used to further business objectives. For over 10 years he has worked as a journalist, researcher and speaker. He can be reached via e-mail at tony@progressinlending.com.m.

The Mortgage Industry:

THE MUSICAL

8 Today’s Lending Insight

How To Get “E” ExposureConsider the various online channels you use regularly to boost your

business. Do you know which ones yield the highest return?The following infographic by Conductor highlights which channel

(among social, organic search, e-mail, and PPC) gets the most visitors, results in the most customers, and gives you the most bang for your click.

The channel that drives the most visitors is organic search. “Visitors from organic search are 2X more likely to be extremely engaged and

visits more than five pages when compared to the other channels,” states Conductor.

Visitors are different from customers, however. So, which marketing channel results in the most customers?

For B2Bs, social (14%) and search (14%) are the most effective at lead generation. For e-commerce and B2Cs, organic search (18%) is.

To find out more about which of those leads are qualified, how many customers return, and more, check out the following infographic:

Today’s Lending Insight 9

According to John Maxwell, vision determines the direction of the team. When a leader communicates a vision clearly and contagiously, team members gain confidence because they know where they’re going and why it’s important to get there. Casting vision successfully requires both emotional and logical transference.

In my history, I’ve come across several high-powered executives that have a great vision. In their mind they know where the mortgage industry is headed and they are on a mission to get the industry moving in

that direction. Sounds great, right? Well, it can be great if done right.

Here’s what I mean: the electronic mortgage will transform our space for the better, so technology vendors go out there talking about being data driven and going green, etc. That’s all fine and good, but the lender is just interested in return on investment, for the most part. My point is that you have to both tap into the emotional and logical end of an argument to make your vision a reality.

You might ask: What is needed to transfer a vision emotionally?

1. Credibility. A leader’s actions speak louder than words. Leaders ought to go first and give the most when contributing to a vision.

2. Passion . Have you ever gone through a checkout lane and had a cashier robotically recite a sales

pitch asking you to sign up for the retailer’s credit card? If so, you know that presentation without passion is utterly unconvincing.

3. Relationships. People buy into the leader before they buy into the vision. How do you get team members to buy into you as a leader? By serving them and adding value to their lives. People don’t care how much you know until they know how much you care.

4. Timing. For a vision to connect, the timing needs to be right. The right decision at the wrong time is still the wrong decision.

5. Felt Needed. People are

looking to link up with something bigger than themselves. Studs Terkel was right: most people have a job that’s too small for their spirit. They want a sense of purpose, not just a paycheck.

Now that we have the emotional

side mapped out, you might ask: What is needed to transfer a vision logically?

1. A realistic understanding of the situation today. Some leaders cast vision for tomorrow to cover up the fact that they’re not taking care of business today. As leaders, we have to confront reality. If we’re not honest about our present circumstances, how can we expect people to believe our plan for the future?

2. A sound strategy. Do you have a game plan that you can articulate clearly and succinctly? Team members need to know where they’re going before they can fully accept the responsibility for getting there.

3. The commitment of key performers. If you can’t convince your top players of the plan, then you won’t be able to gain the backing of the team.

4. Celebration of each victory . A big vision happens by reaching a number of smaller goals. When celebrating each win, recap the values and principles that led to victory. In doing so, you reinforce the behaviors needed to accomplish the overall vision.

5. Evaluation of each defeat . When the team misses a goal, it’s important to acknowledge the failure and to communicate how the team can do better moving forward.

6. Time. Whereas emotional transference depends on timing, logical persuasion simply takes time. People often need to mull over an idea and wrap their minds around it before they will agree to move forward.

In closing, the best leaders marry emotion with logic to get their vision across. You have to have the whole package. Getting all your ducks in a row to get that entire package may be challenging, but, to go back to my prior analogy, once you’re there you’ll have every lender you meet embracing full electronic mortgages or whatever else your vision dictates. You can make it happen.

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What’s Your Vision For Personal And Industry Advancement?

ABOUT THE AUTHORMichael Hammond is chief strategy officer at PROGRESS in Lending Association and the founder and president of NexLevel Advisors. NexLevel provides solutions in business development, strategic selling, marketing, public relations and social media. He can be reached at mhammond@nexleveladvisors.com.

10 Today’s Lending Insight

As a leader in your mortgage banking organization, one of the primary responsibilities you have is training your loan originators. Every organization, of course, has a different culture and is faced with different circumstances that the training must take into consideration. But, regardless of the specific training program you are implementing, there are three essential components to every sales training session. Whether you provide the training yourself or you hire an outside trainer, you’ll want to make sure these three things are

always covered.First, you’ll want to make sure your

LOs are trained on the products. They’ve got to know the loan options inside and out. They must know the latest industry news and the most current updates in legislation. Being able to understand and adequately explain the way mortgage products work is foundational for being able to sell mortgages to buyers. Even more so than many other industries, the knowledge of a mortgage banker is highly valued by buyers. People want to know that they are dealing with someone who knows their

stuff. Whatever training program you are implementing, be sure to include an ample amount of material on bolstering product knowledge. That’s where it all begins.

Secondly, you’ll want to make sure your LOs are sufficiently trained on strong interpersonal communication skills. If your loan originators have all the knowledge in the world but cannot relate on a personal level to buyers, they aren’t salespeople; they’re analysts. Howard Schultz, CEO of Starbucks, once said, “We aren’t in the coffee business serving people; we’re in the people business serving coffee.” Likewise, your loan originators aren’t in the mortgage business serving people; they’re in the people business serving mortgages. Train your people how to be empathic and understanding. Teach them how to listen and express genuine interest in buyers. Just like in any other industry, people looking for mortgages want to business first with people they know, like, and trust.

Finally, you’ll want to train your LOs to maintain a positive mindset. When the economy is bad (and it inevitably will be from time to time), it can be easy for your salespeople to become discouraged. When regulation becomes stricter and fewer people can qualify for mortgages, LOs can easily slip into despair. But, as well as know, such a perspective often becomes a self-fulfilling prophecy. The worse off your salespeople think they are, the worse off they will become. Negative thoughts lead to negative behaviors that validate them. Conversely, positive thoughts lead to positive behaviors that validate those thoughts. As Henry Ford is credited for saying, “Whether you think you can or think you can’t, you’re right.” Always incorporate the importance of maintaining a positive perspective into your training programs.

So, there you have it. Three “P”s: product, people, and positivity. Whatever your circumstances are and whatever your training is about, try to incorporate these three items into your presentation. If your LOs know what they’re talking about, they can relate to buyers, and they stay positive, your organization will continually have what it needs to be successful in a tough marketplace.

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3 THINGS EVERY LO MUST BE TRAINED FOR

ABOUT THE AUTHORDavid Lykken has garnered a national reputation as a visionary, entrepreneur and business leader within the mortgage industry. He has also become a regular guest on the FOX Business News with Neil Cavuto, Stuart Varney, Liz Claman, Dave Asman and others. Additionally, David has his own national weekly radio program called “Lykken On Lending” that can be heard each Monday at Noon Central time by going to www.LykkenOnLending.com. As co-founder and Managing Partner of KLS Consulting doing business as Mortgage Banking Solutions, David Lykken has over 37 years of management experience as an owner/operator with in depth expertise in real estate finance and housing.

Today’s Lending Insight 11

As a technology company, Mercury Network is keenly aware of the importance of third-party oversight, vendor compliance and their implications for lenders. Since it’s clear lenders are liable for their service providers, all technology companies are gearing up. We’ve already begun receiving questionnaires from several larger lenders performing due diligence on their service providers, so we can shed some light on what’s happening on this important front so far.

In 2013, both CFPB and The OCC issued bulletins with specific guidance on their requirements for effective Third-Party Oversight. Since over 600 lenders and AMCs use Mercury Network to power over 20,000 appraisal deliveries a day, so we’ve already been through several third-party oversight audits.

We can combine the OCC and CFPB requirements with some of the lessons we’ve seen many lenders have already learned in their audit process, and offer an industry guide to best practices when it comes to selecting partners.

To get a jumpstart, you can download our free report,

“Third-party oversight: Avoid common pitfalls with solutions for

compliance, efficiency, and control” at http://www.mercuryvmp.com/TPO. (NOTE: In the online version, please make destination URL this for tracking purposes: http://www.mercuryvmp.com/landing/TPO/?ls=web&cid=701U00000006l4f) It has links to all the agency bulletins, additional resources, and

a good overview of what’s expected from lenders when it comes to

compliance. In addition, we’ve added fourteen recommendations so you can avoid penalties and risk when choosing service providers.

Since most lenders are busy dealing with lower originations, Qualified Mortgage (QM) and other compliance burdens, many of you may not have scrutinized appraisal service providers. But as more and more lenders make progress on streamlining operations, service providers like us know our turn under the magnifying glass is coming.

As with all compliance-driven changes, third-party oversight can be seen as a hassle —adding extra burdens to lenders and service providers. But really digging into vendors who are critical to your success is always good practice. You will undoubtedly find that some of your valuation vendors present unacceptable risk, and lining up safer and better alternates has benefits beyond just ensuring your compliance.

With better vendors, you’ll find ways to be more efficient. You can reduce overhead costs, deliver better service to your borrowers, reduce delays and hassles, make loan originators more productive, and much more. As you start this process, also consider how flexible you are in switching vendors. Make sure you have a technology platform that can give you reports and statistics on your vendor performance, and make sure the technology you use gives you the flexibility to try new vendors easily and quickly. Vendor flexibility is one of the key tenants in the OCC requirements, so it’s important for compliance and for successful operations.

Compliance may be the trigger for your scrutiny and ultimately the reason you find yourself switching up some of your valuation vendors, but unreliable vendors are negatively impacting your bottom line. Like going to the dentist, vendor evaluation is painful, but better for you in the long run.

TomorrowsMortgageExecutive.indd 1 3/24/14 10:07 AM

ABOUT THE AUTHORJennifer Miller is president of a la mode’s Mortgage Solutions Division. Her focus is Mercury Network, the nation’s premier vendor management platform responsible for 20,000 appraisal deliveries a day. She manages the daily operations of the division, the continuous additions of new features to Mercury Network, and the support of the growing client base.

Avoid Common Pitfalls With These 14 Recommendations

12 Today’s Lending Insight

(continued from P1)HMDA data that we have collected

and supplied to regulators for over thirty years is public. Anyone who

wants it can request the entire database. Anyone who has ever gone through a HMDA data review which resulted in a full data scrub

understands how complex and massive this is. Yet now they are asking for more. So what has been done with all this public data? From what I can see, not much.

Any by the way, how do we know it is accurate data, is it safe from hackers? While the majority of lenders spend lots of time and money compiling the data and checking its accuracy and validity, there are others who have created the data or backed into the information based on assumptions

and calculations. Who would ever want to rely on this data? Do they really think it will be any better quality than what we have now?

Now they want us to provide even more sensitive data about individual borrowers such as credit scores, DTI, etc. OF course they say this data will not be made available to the public. But how hard will it be for someone who knows how, to get into this information and use it or sell it. We have seen the consequences to companies that have failed to protect their consumer data, yet they want us to put all of ours out in a public database. For an agency that was created to protect the consumer, this seems to go far beyond their mandate.

Of course the basic underlying question is “Do they really need all this data?” Well supposedly it will give the regulators better insight

into the actions and activities of lenders; filling in gaps that they haven’t previously been unable to fill. But have they tried? Recently, Mortgage True View, a database company obtained HMDA data for years 2010 to 2012 and then set about attempting to gather the 2013 data. While not obtaining all the data submitted, there was a sufficient amount obtained to allow for the development of a very comprehensive database. This database is being used to conduct various types of analyses. Just by comparing individual company data against the larger industry database there was more than sufficient information obtained to isolate where problems exist and exactly what they were.

So why do we need more data if the issues surrounding the classes of borrowers protected by these laws can be analyzed and lender compliance determined by what is already collected? It is time for the CFPB to do some hard work using the data they have before putting borrowers at risk and causing more confusion and frustration for lenders.

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ABOUT THE AUTHORrjbWalzak Consulting, Inc. was founded and is led by Rebecca Walzak, a leader in operational risk management programs in all areas of the consumer lending industry. In addition to consulting experience in mortgage banking, student lending and other types of consumer lending, she has hands on practical experience in these organizations as well as having held numerous positions from top to bottom of the consumer lending industry over the past 25 years.

Today’s Lending Insight 13

(continued from P1) A recent study found that the majority of institutions have cited an increase in compliance costs due to Dodd Frank, particularly from increased staffing requirements needed to understand and implement new mortgage rules.

To overcome the burden of cost and compliance -- and avoid being pushed out of the mortgage business altogether -- community institutions are considering outsourcing their lending operations. In doing so, several challenges are resolved:INCREASE PROFITABILITY

Many community banks and credit unions are exiting mortgages due to limited profitability. In fact, the cost to originate is at an all-time high. The Mortgage Bankers Association (MBA) recently reported that banks made

an average of $2,256 from each loan originated in the fourth quarter of 2013. This is down from the previous quarter at $2,465 per loan. In addition, MBA also reported that the net cost to originate a mortgage increased to $3,813 in Q4 – up from $3,353 the previous quarter. This increase can largely be attributed to compliance requirements.

Yet there is an inherent need to provide customers with mortgage products; not only to retain them as customers, but extend the institution’s brand. And while mortgages have provided limited profitability for smaller institutions, working with an experienced outsourcing partner can change that. By outsourcing their lending operations, community institutions are able to provide

mortgages without the significant operating costs resulting from new and changing regulatory rules. BOOST CUSTOMER SERVICE

By outsourcing your mortgage business, community institutions are also able to improve customer service for two reasons. First, institutions can focus efforts on other core products rather than adding or reallocating resources to manage compliance functions. As a result, more attention can be paid to other more profitable services. Second, the right outsourcing partner will manage the mortgage process more efficiently and consequently provide a better customer experience. MAINTAIN A COMPETITIVE EDGE

It is important for community banks and credit unions to continue offering mortgage products to retain customers as well as for new customer acquisition. Because mortgages continue to be a core product for financial institutions, losing business to a competitor can be dangerous. Take, for instance, a long-standing customer that has banked with your institution for years. He has his primary checking account, a savings account and an auto loan through your institution, and now he wants a mortgage loan. If your

institution is unable to provide that product, he is forced to consult with another institution, and that institution will market their checking and savings account services to him. This ultimately puts you at risk of losing the rest of that customer’s accounts. By outsourcing, however, you can continue to offer mortgage products and better meet customers’ needs.

While outsourcing clearly offers substantial benefits, it also comes with its own set of challenges. ENSURING EXCELLENT CUSTOMER SERVICE

If done right, outsourcing can improve customer service, as mentioned earlier. However, if not done right outsourcing can severely impact service levels – and your reputation! When vetting potential partners to outsource your lending operations to, make sure customer service is a priority. Ask what their customer satisfaction rate is. If they can’t provide it, that means they don’t track it. And if they don’t track it, it’s not important to them. Also look for partners that not only apply six sigma, but human sigma too. Further, avoid partners that are process centric versus customer centric, as customer service tends to suffer in those models. AVOIDING COMPETITIVE RISKS

Outsourcing can also present competitive risks. Consider the scenario with your customer being marketed to by your competitor that offered the mortgage product you could not. Now consider another situation brought on by outsourcing, which ironically was intended to avoid the first scenario: your outsourced partner is a large bank or has sold your loan to one that has now gained access to your customer. That bank then begins marketing their other services to your customers, such as auto loans, checking accounts and so on. If not vetted properly, your partner could expose you to the very risk you are seeking to mitigate, so before you hand over your mortgage business, make sure you’re not exposing your customer base to cross selling.

Despite the potential pitfalls of outsourcing, the pros far outweigh the cons. As origination costs climb and community institutions juggle the hundreds of pages of new mortgage rules, outsourcing to the right partner can provide substantial benefits when adding staff isn’t an option, including increased profitability, excellent customer service and a competitive edge. With the right approach, community institutions can and should stay in the mortgage game.

Do You Know How to Cut Through theChallenges Limi ng Your Business?

If you listened to Lykken on Lending, you would!Lykken on Lending is a weekly, 60-minute radio program hosted by David Lykken – mortgage veteran of nearly 40 years, along with regular guests Alice Alvey – President of Mortgage-U.com, Joe Farr – of MBSquoteline.com and Andy Schell a.k.a. “The Pro t Doctor” - Managing Partner of MBS.

Covering Topics from Main Street to Wall Street and Capitol Hill

Listen LIVE Coast to CoastMondays at 1:00pm Eastern/10:00am Paci c,

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Download the Podcasts of previous episodes any me ath p://www.LykkenOnLending.com

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Opera onal Reviews• Best Prac ces Assessment• Produc vity & Pro tability • Warehouse Lending Audits

Bank-Owned Mtg Opera ons• Create/Expand Mtg Pla orm• Cross-Sale/Customer Reten on• Regulatory Compliance/Audits

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ABOUT THE AUTHORDennis F. Hardiman is founder and chief executive officer for Embrace Home Loans, an approved lender for FHA, VA and an approved seller servicer for FNMA, FHLMC and GNMA. Embrace Home Loans has remained a prominent leader in the industry, having provided hundreds of thousands of individuals and their families with mortgage loans. For more information, please visit www.embracehomeloans.com.

Overcoming Regulatory Burdens

14 Today’s Lending Insight

(continued from P1) This situation continues to exist in most financial institutions.

It takes the powerful combination of data, document and people man-agement to get the job done. This ar-ticle discusses best practices in each of those areas, and how they should interact to create a truly effective risk management program.DATA

Data must be accurate. Manual data entry continues to plague the industry, leading to mistyped infor-mation and other errors. These in-accuracies are often never located, making the situation even more se-vere. We can avoid this by drawing data directly from the source docu-ment. Data management technology should have the capability to read data from any type of document,

and should also enable the third-par-ty creator of the data source, such as an appraiser, to directly populate relevant fields into the database.

Data management should begin before a deal transpires, starting with initial contact. And if a deal dies? The data should never be thrown away. Items like the offering memoran-dum, data tapes and analysis can

be tremendously helpful if you are looking at a similar, or even the same deal, down the road. So avoid the “dead deal box” – you never know when you’ll need that information again.DOCUMENTS

Reliable, accurate data requires the use of a robust electronic docu-ment management system. Keeping

digital records of your documents is imperative, as is ensuring that up-dates to a loan, correspondence with a borrower, and decisions by loan managers or servicers reside in a single asset file. If inaccurate data is uncovered, the original file must be located. An electronic docu-ment management system simpli-fies this process, but does not solve the issue completely: even electronic documents can be mislabeled and difficult to find. The loss of original documentation can prevent an asset from being sold, and can then ne-cessitate a lengthy process to fix the issue before the asset is marketable again. Look for document manage-ment technology that has advanced search capabilities, to allow for con-tent queries based on keywords, sentences, exclusions and other specific parameters to find all mate-rial applicable to a loan.

Unfortunately, a majority of finan-cial institutions have not implement-ed technology with advanced docu-ment management functions, and are not maintaining the critical tie be-tween documents and data.PEOPLE

Intelligence is not exclusive to data. True insight comes from pair-ing human intelligence with smart technology. We must move beyond monitoring numbers, and delve into what is happening in the social eco-nomic market. Technology can pro-vide the data, but the interpretation and use of the data will determine success. That’s where people are critical. Data alone will not tell you the full impact of Apple (fictitiously) deciding to leave the Cupertino area. But employees with their ear to the ground can help fill in the blanks. Technology steps back in to provide a way for people to share this insight and intelligence. For instance, if you know on a personal level that a bor-rower is in trouble, there must be an easy way to communicate that back to the person managing the assets tied to that borrower. COMBINING IT ALL

In order to successfully combine the power of data, documents and people when it comes to risk man-agement, an enterprise-wide ap-proach must be taken. A platform is needed that connects all types of intelligence and then digests and monitors and communicates it in a centralized way. Silos must be bro-ken down. Risk management cannot be viewed separately in the retail and the commercial sides of the house. High-level risk management must be viewed by all contributors to the pro-cess, above departmental partitions, and with accountability.

RISK MANAGEMENT MUST COMBINE TECH AND PEOPLE

The mortgage market is treacherous. One false move could put it all at risk.

Companies that want to succeed in today’s regulatory environment need proven expertise in quality control and operational risk management.

That’s why dozens of the industry’s leading lenders, servicers and third-party service providers rely on Walzak Consulting’s extensive experience to help elevate quality, ensure compliance, increase profits and reduce costs.

Gain regulator-ready compliance. Exceed investor expectations for quality control. Attain sleek, lean performance levels. Achieve blue-ribbon consumer satisfaction.

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EXPERIENCEYou Can TRUST

ABOUT THE AUTHORJoy Hou is co-founder and CEO of San Diego-based Metis Financial Network, a provider of technology solutions that manage data, documents and workflow for real estate and finance professionals. She oversees the firm’s overall operations and implements the strategic direction of the company.

Today’s Lending Insight 15

(continued from P1) You may notice that there’s no

mention of Hillary Clinton at all in that answer. But, then again, Warren has a chronic fixation on rewriting history to meet her needs while carefully ignoring facts that disrupt her increasingly bizarre self-proclaimed mission as being the champion of the American working families.

For those of us that were around in the 1980s, the notion that “cops were taken off the beat in financial services” is rather odd, consider-ing that (1) the depth of financial deregulation that fueled the 2008 crisis – most notably, the repeal of the Glass-Steagall Act – began in the Clinton era and not the Reagan era, and (2) more than 1,000 bank-ers involved in the savings and loan crisis of the late 1980s were indict-ed and convicted. The latter figure is especially fascinating when one

considers that the architects of the 2008 crash were never indicted by Eric Holder’s Justice Department – a fact that Warren has never pub-licly criticized.

Indeed, Warren always seems to be stricken with laryngitis whenever inconvenient facts disrupt her zany view of a nation being destroyed by the financial services world. In April, for example, the Consumer Financial Protection Bureau (CFPB) issued a report that found more than two-thirds of mortgage-relat-ed complaints filed with the bureau in 2013 were dismissed, while only 2% of the mortgage-related com-plaints related in financial compen-sation. Of course, this contradicts Warren’s much-repeated shtick that mortgage companies are try-ing to destroy borrowers – and, not surprisingly, the senator opted to say nothing about the CFPB’s data.

Warren and her liberal allies were

also conspicuously silent when news reports surfaced about com-plaints by CFPB employees involv-ing racism in the agency’s person-nel process. And Warren has also said nothing about the CFPB’s bal-looning budget on the refurbishing of its Washington headquarters, in-cluding the hiring of the architectur-al firm behind Dubai’s Burj Khalifa skyscraper as the designers of this opulent project. Isn’t it a bit pecu-liar that she has no problem when

her pet agency is wasting hundreds of millions in taxpayer funds gen-erated by the working families she claims to support?

Furthermore, Warren’s claim that financial services companies “block regulations that they don’t want” will come as a surprise to lenders and servicers that adhere to the Dodd-Frank Act and the dramat-ic operational changes imposed upon them by the CFPB and oth-er regulators. Warren’s insistence that financial services companies can “roll over agencies whenever they can” doesn’t explain the bil-lions of dollars in fines that these companies have been paying out over the past several years – and, of course, Warren had nothing to say when it was revealed that the majority of state governments used their respective cuts of the National Mortgage Settlement for projects that had nothing to do with home-owner assistance.

As for Hillary Clinton, she re-cently accepted $400,000 for a pair of speaking engagements sponsored by Goldman Sachs. To her credit, she didn’t pretend this payout never happened. But when George Stephanopoulos repeat-edly pressed Warren as to whether she would support Clinton’s presi-dential bid, the senator hemmed and hawed before blurting out: “If Hillary – Hillary is terrific!”

Oh, a politician that pockets $400,000 from a Wall Street giant in exchange for a pair of speeches is “terrific”? Thank you, Elizabeth Warren, for confirming your phoni-ness and idiocy.

Elizabeth Warren’s Inconvenient Truths

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ABOUT THE AUTHORPhil Hall has been (among other things) a United Nations-based radio journal-ist, the president of a public relations and marketing agency, a financial magazine editor, the author of six books and a horror movie actor. Now he is a regular contributor to PROGRESS in Lending. Also, as you will discover, he is not shy about stating his views.

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while increasing appraisal quality and underwriting speed. Today, Mercury Network powers over half the nation’s residential transactions, with more appraisal deliveries than any other platform by far. If you have appraisal issues, get peace of mind with the industry leader. Call 1-800-434-7260 today.

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