“I want to start educating as many people as I can that en terprise does not just mean origination to closing,” said Michael Detwiler, president of 3t Systems. “Everybody’s using terms such as ‘enterprise,’ ‘EAI,’ ‘enterprise-wide applications,’ and they don’t know what it means. Our goal through 2004 is to educate the industry on a true enterprise application.”

Some enterprise-wide systems involve an LOS that connects to vendors for credit, flood certification and title agencies automatically without the need to rekey data. Once received, the processor moves all received information to the underwriter.

“That’s a basic application,” Detwiler said.

A true enterprise-wide system, according to Detwiler, could pull together legacy, accounting, and customer relationship management (CRM) systems together so that once a loan is registered into the system, the Mortgage Cadence LOS could pull credit reports, flood certifications, send out title and appraisal requests, wait for them to come in, and when received through a fax server, automatically image them into an electronic file, and then send out the appraisal electronically and automatically to the loan officer, processor or underwriter. It can take data after closing and automatically place it into post-closing and servicing operations.

“It’s all happening behind the scenes,” Detwiler said. “That’s the beauty of it. Not rekeying data is last year’s news.”

Behind the scenes, Mortgage Cadence, the 3t Systems LOS, services components through its “adaptive configuration engine” which the company calls its ACE Engine.

Kim Karouni, executive vice president at 3t Systems, said the ACE engine extends Mortgage Cadence into a “true enterprise system” because it could power Mortgage Cadence as a stand alone product and it could reach out to other systems within the organization and external systems that work with the mortgage company on the outside.

“The engine powers the automation within Mortgage Cadence to support the LOS activities from the point of sale all the way to processing, underwriting, closing and post-closing,” Karouni said. “It is updating and validating data. It is driving workflow, assigning tasks to the loan, processing tasks and moving the loan through its process in a very dynamic way by applying rules that the lender can define.”

The engine uses Web services and a service-oriented architecture that breaks individual bits of functionality into Web services or components that users could access from anywhere on the Internet. The engine allows users to leverage the system with “acceptability points” so that companies would not need to spend costs on an “embedded bi-directional interface,” said Josh Perina , vice president of technology at 3t Systems.

 “You’re taking these individual components and managing them in a distributed fashion,” Perina said.

The most popular names in Web services are Microsoft, with its .NET solution and Sun Microsystems, but Perina said the entire technical marketplace is moving to Web services.

The ACE engine could manage the frequency and timing in which all of the systems communicate within the organization, Perina said. Accounting, servicing, credit providers and vendors could tie into the engine and it would create interactions from rules set up in within the system. Lenders could customize the rules to their preference.

For example, an appraisal arrives into a fax server and the rule for the ACE engine could be to scan the appraisal into an image and place it into an electronic file. The rules could also tell the engine to notify the mortgage underwriter, processor and loan officer that the appraisal arrived and is in the system.

Karouni uses the example of a borrower who changes a refinance to a cash-out refinance, an appraisal could change from a drive-by to a full blown appraisal, but the system would automatically update that information throughout the organization.

“We also have auto-fee population where fees for different services are automatically applied to a loan,” Karouni said. Meanwhile, as underwriting conditions change, they would automatically generate notification to the underwriter and loan officer.

A “simple message format” would inform the parties, Karouni said.

Mortgage lenders would be able to implement the engine and Mortgage Cadence product “piece-by-piece.” Meanwhile, larger lenders still have legacy systems and if data is embedded into the system, Perina said they would want to replace the system and move the data into Mortgage Cadence.

“If it’s truly a legacy system housed in an LOS, that becomes a big task of the replacement of that legacy system,” Perina said.

But he added that it is possible to integrate the legacy systems into the LOS and make Mortgage Cadence the center point of interoperability between all of the legacy systems that could exist.

“Every implementation is different,” Karouni said. “We tailor a plan to optimize the opportunity for lenders and achieve their objectives. Often, we will replace the back office first. We will allow the legacy systems to take the loan up to a point in time and have the data come into Mortgage Cadence and complete the process on the back end. Over time, we would integrate the front-end of the process.”

In other cases, 3t Systems makes changes based on business channels. But the focus is in developing a business plan for lenders to meet their objectives and also “continue to operate without missing a step,” Karouni said.

“Lenders would custom the events based on their own business processes,” Detwiler said. “It’s not just for the largest lenders in the world. It would depend on the technology prowess of the lender and a staff to leverage extensibility options. But it was built for the business user to administer without technology skills.”

However, Detwiler is also realistic that most mortgage lenders still need to see paper and actively “push buttons.” Athough he finds less skepticism about technology’s potential than before, and business user understand technology better, Detwiler said the true enterprise system will still “roll some eyes.”

“They’re no longer going to accept the long words,” Detwiler said in reference to today’s decision makers of mortgage technology. “They want proof. They want you to show them how the system is going to work. But we like it when they say that because we know we can show it to them."
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For the Las Vegas and Miami fairs, HUD will handle booth registrations directly. (H.O.P.E. International Outreach is no longer involved in the fairs.) The fairs target first-time homebuyers, providing access to and hands-on learning to thousands of potential homeowners. Exhibitors from all sectors of the housing industry are participating and showcasing their products and services. 

The Mortgage Bankers Association will exhibit at the Las Vegas and Miami fairs in support of National Homeownership Month and its commitment to the Blueprint for the American Dream. Please note, the HUD housing fairs are not MBA-sponsored events.

To register for the two remaining fairs, you must:

• Download the registration form(s) for each event (forms are in Word format); click here to download the registration form for the Las Vegas housing fair; click here to download the registration form for the Miami housing fair.
• Complete the form(s), and e-mail or fax them to Bernard Yergeau (Bernard_C._Yergeau@hud.gov for the Las Vegas fair, (702)388-6244) or Judith Ayers (Judith_A._Ayers@hud.gov for the Miami fair; (305) 536-5765) If you have any questions, please e-mail Yergeau or Ayers directly.

If you have already submitted a registration to the first two fairs, please contact H.O.P.E.  International Outreach directly at either (303) 412-8330 or (303) 587-8827.

MBA looks forward to seeing you in Las Vegas and Miami.
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Dan Scheuble, chief information officer at Fidelity National Financial , Jacksonville, Fla., said mega-players are “into everything” and all businesses, including subprime and subservicing. However, he said that if Fidelity’s smaller customers fail to specialize in a particular area, they find themselves getting acquired.

Richard Thornberry, founder, CEO and president of Nexstar Financial Corp.,  St. Louis,  focused on business process outsourcing (BPO) in 1999 as a partnership to improve competitiveness, profitability and increase shareholder value.

“A few could be good at everything,” Thornberry said, adding that Countrywide Financial, Calabasas, Calif., owns about 30 percent of the market share which, by historical standards, would make the company a mega-player.

“I remember when a 3 percent market share was good,” Thornberry said.

Meanwhile, Fidelity’s lender customer numbers are dropping based on consolidation with four or five major players controlling 30 to 40 million loans, Scheuble said, and more companies are scrapping technology projects because they have no idea of scale for the massive growth.

But Thornberry said BPO is new and an opportunity for mortgage companies to gain an edge in an industry where cycles are challenging and the regulatory environment is complex and changing.

“It has to be more than financial,” Thornberry said. “What is the strategic competitive value and the financial value?”

Nexstar Financial built its BPO operations from scratch and combined technology to form a paperless environment with “mass customization in an automated way,” Thornberry said.

Anne Beckett, vice president of lending operations at Thornburg Mortgage , Santa Fe, N.M., said the company has great flexibility to move into channels that it is not large enough to get into on its own. The real estate investment trust has $22.4 billion in assets and 75 employees, with six employees outside of Santa Fe, and no labor pool for mortgage lending.

“We were allowed to piggy-back into areas of business that are profitable,” Beckett said.

The average mortgage size for Thornburg is $550,000 with a 734 FICO average and a focus completely on “A” paper adjustable rate mortgages. Thornburg Mortgage outsources the call center, processing, underwriting, image repository, servicing, marketing, advertising, public relations and appraisals.

Beckett said the keys to strong partnerships are shared philosophies in vision on the mortgage industry and originations, as well as a shared definition of customer service and respect and encouragement for goals.

Although partners have their own agendas, Beckett said to use that knowledge as an advantage and incorporate their agendas into your own business plan.

“Outsourcing is extremely practical,” she added.

Scheuble noted that partnerships will become not only practical but essential, whether the partners are vendors, GSEs or even competitors. Multiple loan products, such as home equity lines of credit and mortgages, he said, would need to come off the same loan technology platform.

Gregory Sullens, president and CEO of Financial Service Solutions, Charlotte, N.C., said shared platforms could bolster collective strengths.

In April 2003, a 50-50 joint venture between Bank of America, Charlotte, N.C. and Fidelity National Financial formed Financial Service Solutions and, in December 2003, Accenture, New York, provided an infusion of capital into the BPO.

Sullens mentioned the partnership of Bank of America, FNF and Accenture as a means to leverage new distribution and sales into one national sales platform, and that a paradigm shift would take place in which lenders do not deliver ancillary products but one loan.

“Remaining status quo is not an option,” Sullens said.

He added that collaboration transforms boundaries and, at the end of the day, the focus moves to the consumer.

“That’s all that matters, the customer experience,” Sullens said. “The industry must look for ways to improve the customer experience.”

Beckett’s perspective on the customer experience is that consumers want a loan fast and quick but, most important, “they want a loan.” She added that technology should not interfere with treating a consumer like an individual and keeping the “unique one-on-one relationship” is essential.

“There is as much philosophy to lending as there is technology,” Beckett said.

But Scheuble said business strategy and costs must align with technology and, more often, the mortgage executive will ask about “architecture.” 

“They [mortgage executives] need to have a road map in place to use technology components going forward,” Scheuble said. “That’s something we haven’t seen before.”

Cheryl DeRoche Johnson, first vice president at ABN AMRO Mortgage Group, Inc. , Ann Arbor, Mich., who spoke about working with third-party providers to add additional skill sets, said that poor execution could kill a great plan on the front end and it is necessary to plan for exceptions.

“Make sure that you use a project management mindset when you go to implement,” De Roche Johnson said. “Modify the plan if you find there are defects. What you thought at the beginning might not be what is really going to happen. As you progress with each step, there are things you are not going to know about. Don’t forget to keep measuring. But in general, just get it done.”
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The Mortgage Payment Protection Plan (MPP Plan) is offered at no cost to lenders or consumers. MGIC pays the premium for the MPP Plan's monthly mortgage principal and interest payment protection to a third party insurance provider. The program enables MGIC to reduce its losses and to pass on that benefit to help protected borrowers. The MPP Plan is offered by participating lenders and is targeted to first time homebuyer and emerging markets loan programs.

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ClickHome, Santa Clara, Calif., launched an employee benefit program that delivers savings to members who buy, sell or finance a home. The service is available at no cost to companies including it as part of a benefits program. ClickHome will assist employees in their pursuit of homeownership by providing full-service real estate and mortgage services at reduced rates.

By aggregating services, streamlining the administrative process and creating efficiencies throughout its organization, the company can pass its savings on to employees as follows: 50 percent brokerage fee discount on the sale or purchase of a home (1.5 percent charge vs. 3 percent commission), points reduced by 35 to 50 percent on any loan, purchase or refinance.

Once enrolled, ClickHome will host seminars at the company's offices to educate and inform employees considering a real estate or mortgage transaction. Seminars address topics such as market trends, how to buy or sell a home, financing techniques and 1031 exchanges. Topics can also be customized to meet an individual company's needs.

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Loan Protector Insurance Services, Solon, Ohio, announced the expansion of its office space in to accommodate continued growth. The company relocated part of its operation into a newly re-modeled 15,000-square-foot office, just minutes from the corporate headquarters. The data input and computer information technology departments, which will be housed in the new facility, have grown by more than 100 percent within the past year due to an increased demand for the

In the past year, Loan Protector further developed the products and services including more than 80 enhancements to its tracking system. In addition, Loan Protector increased its customer call center by 100 percent and added several seasoned managers. Finally, the company instituted new bi-directional interfaces with leading servicing software providers, as well as X12 interfaces with more than 50 insurance companies to more effectively and accurately capture insurance data for customers.

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Washington Banking Company, an Oak Harbor, Wash.-based holding company for Whidbey Island Bank, plans to close its Washington Funding Group (WFG) subsidiary effective June 30. The subsidiary provided a loan funding source for mortgage loan brokers, primarily in Washington, Oregon and Idaho. Business in process will be transferred to the Bank's Burlington, Wash., office.

In April, Washington Banking Company announced first quarter results, including 17 percent loan growth from a year ago and net income of $1.1 million, or $0.20 per diluted share. Since its initial public offering in 1998, WBCO consistently paid a cash dividend each quarter, and increased its dividend each year.
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According to CMBA’s Quarterly Delinquency Survey for the period ending March 31, 99.69 percent of the California commercial real estate loans serviced by 17 mortgage banking firms were either current or only one payment delinquent—a delinquency ratio of .31 percent. This compares to a delinquency ratio of .35 percent three months ago and .18 percent a year ago. Fifteen of the 17 companies reported no loans more than 30 days delinquent.

Of the $59.6 billions of loans being serviced by the 17 California commercial mortgage bankers, $185.7 million, consisting of 19 individual loans, was two or more payments past due. The three largest loans, representing 51 percent of this total, were a $42.6 million loan on a hotel, a $34.4 million loan on an office building and a $17.2 million loan on a single purpose property. The 19 delinquent loans represent .19 percent of the 9,917 commercial real estate loans included in the survey.

A table that compares delinquencies by type of property is available. For a copy of the data please contact CMBA’s Marcella Rojas at 916-446-7100 or marcella@cmba.com.
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On May 14, the Secured Diversified Investment and Denver Fund l Ltd. entered into an agreement with Iomega Investments Ltd. for the Cannery retail shopping center.

"The acquisition was made possible by William Biddle, vice president of Business Development and Acquisitions for Secured Diversified Investment Ltd., who used creative structuring to resolve a number of [the] seller's problems, including default on [an] existing second mortgage," said Cliff Strand, CEO for Secured Diversified Investment.

The Cannery is located on nearly 3.4 acres with nearly 37,000 square feet of retail space.

"We believe that the Cannery is a substantial opportunity to increase value by increasing and stabilizing occupancy," Strand said.

Secured Diversified Investment Ltd will deliver 250,000 shares of its Series C Preferred Stock (valued between the parties at $3.00 per share) and a two-year Promissory note in the principal amount of nearly $155,000 bearing interest at an annual rate of 7 percent.  The principal amount of the note is payable $50,000 at the six-month anniversary, $50,000 at the 12-month anniversary and the remainder at maturity.

Pursuant to the lease agreement, the Secured Diversified Investment and Denver Fund I can receive all lease payments from tenants.  The lease/option agreement provides that the company and Denver Fund I would acquire the property for $5,950,000.  The property was appraised for $7,150,000 in December 2001.
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Advanced FHA Loss Mitigation (Course No. E2401725) is a one-day (July 13), case-study based course  that examines the more complex problems and circumstances servicers face with FHA defaulted borrowers on a day-to-day basis. It is aimed at those with basic understanding of the FHA Loss Mitigation program.

Topics covered include:
• Stand-alone Special Forbearances as well as Special Forbearances combined with other strategies
• Effective financial analysis techniques and strategies on obtaining complete and accurate information
• Effective borrower contact
• Balancing time requirements with loss mitigation option considerations
• Loan Modifications, Partial Claims, and Pre-Foreclosure Sales
• FHA Audit

The Advanced FHA Loss Mitigation Seminar benefits all default-servicing professionals, from senior vice presidents and managers to processors in the areas of collections, loss mitigation, foreclosure and claims, but is primarily geared toward training personnel with a basic knowledge of loss mitigation and claims filing.

The Advanced FHA Claims Seminar & Workshop (Course No. E2401730) is a one-and-a-half day (July 14-15), case-study based program that examines the more complex problems and circumstances servicers face with FHA foreclosures on a day to day basis. Case studies include complicated scenarios involving HUD initiation of foreclosure requirements that relate to various loss mitigation situations, bankruptcy, vacancy and combinations of all of these. Through the case studies, participants will learn how to maximizing program benefits and minimizing sanctions for non compliance. Additionally, participants will learn how to effectively prepare for FHA Audits.

Topics include:

• Complex HUD Reasonable Diligence calculations and how to account for various types of delays
• Effective utilization of extension of time requirements
• Importance of loss mitigation and how it impacts the claims process
• HUD’s SFDMS reporting requirements
• Financial consequences of each possible outcome
• All potential losses, including potential monetary assessments on a HUD claim audit, under claimed amounts, over self-curtailments, curtailments, non claimable expenses and other costly errors and omissions
• Complex scenarios involving city and code violations\liens, over allowable expenses, title issues, multiple bankruptcy, attorney fees, non-routine foreclosures, vendor management, hazard insurance cancellation and more

Attendees of each event can earn two points toward the MBA's Certified Mortgage Banker designation.

Both events take place at the Hilton San Francisco. Participants who sign up for both events can earn a $100 discount. For more information, visit the conferences Web sites.
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The toll-free call-in number is 1-877-356-8667, and the conference ID is 7717561. Please ask to join Gerald Aust's call with the Mortgage Bankers Association. Marsha Williams, chair of the committee, will moderate the call.

This call is open to MBA members only and is closed to the media. For more information go to MBA’s State/Local Web page.
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For more on this article, subscribe to Mortgage Banking today. Visit www.mortgagebankingmagazine.com.
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MBA Solicits Member Views on SEC Proposed Requirements for MBS Servicers and Issuers
On June 2, Mortgage Bankers Association members will participate in a conference call with Government Affairs staff to discuss MBA's response to an extensive proposed rule that codifies the Securities & Exchange Commission's informal guidance on registration, disclosure and certifications required for asset-backed securities. 

The proposed rule applies to publicly offered, private label MBS and, while it does not apply specifically to agency securities, the standards established by the rule and practiced under it will influence the way agency securities are handled. Aspects of the rule of particular significance include the requirements for regular certifications by the issuer/depositor and the servicer of the mortgage loans. MBA's Uniform Single Attestation Program (USAP) is mentioned in the rule as the current standard on which the rule would expand. Comments on the rule are due on July 12.
 
To participate in this process or for more information, please contact Kathy Gibbons at (202) 557-2870 (kgibbons@mortgagebankers.org), Deborah McKinnon at (202) 557-2746 (dmckinnon@mortgagebankers.org) or Alison Utermohlen at (202) 557-2864 (autermohlen@mortgagebankers.org).

New Jersey Supreme Court Overturns Glukowsky
On May 26, the New Jersey Supreme Court issued a long-awaited opinion in a case entitled Glukowsky v. Equity One, Inc., 2004 WL 1159735 (N.J. 2004). MBA, along with seven other lending organizations, filed an amicus brief with the court requesting that it review and reverse a decision by the Appellate Court of New Jersey to strike down the 1996 Office of Thrift Supervision (OTS) regulations that implement the Alternative Mortgage Transactions Parity Act (Parity Act). 

MBA took immediate action on this ruling in light of the very negative repercussions of eliminating, though judicial fiat, an entire body of regulations that the mortgage lending industry has relied upon for the past 7 years. The Appellate Court's Glukowsky decision threatened mortgage lenders by, among other things, presenting the threat of retroactive applicability of laws that had been assumed preempted, creating uncertainty about the enforcement of existing pre-payment penalty clauses, and setting a precedent for state intervention into other disputed areas of federal preemption of state law. 

The court ruled that the Office of Thrift Supervision had authority under the federal Alternative Mortgage Transaction Parity Act (AMTPA) to preempt New Jersey’s Prepayment Penalty Law for state-chartered housing lenders issuing alternative mortgage transactions

The ruling stems from a 1999 action in which the plaintiff obtained a balloon loan from Equity One. The mortgage contained a prepayment fee if the loan was paid in full during the first three years and contained a “due on sale” clause. In 2001, the plaintiff sold the property subject to the loan, and Equity One exercised the prepayment fee. The plaintiff filed a complaint alleging that Equity One’ prepayment fee violated New Jersey laws.

A lower court dismissed the suit, citing the federal preemption. But the Appellate Division reversed the ruling, stating that OTS exceeded its authority under AMTPA when it adopted the 1996 rule as Congress, saying that it went beyond the intent of Congress.

But the state Supreme Court reversed the Appellate Division’s decision and reinstated the lower court’s ruling, effectively dismissing the complaint again. The Supreme Court ruled that Congress had delegated “broad rulemaking authority” to OTS under AMTPA to implement and interpret those laws and that the preemption of the state’s prepayment penalty laws was “reasonably permissible.”
 
For more information please contact Rod Alba at (202) 557-2930 (ralba@mortgagebankers.org).
 
T.O.T.A.L. Mortgage Scorecard Working Group
MBA has formed a working group for lenders to address implementation issues connected with FHA's TOTAL Mortgage Scorecard, which has been mandatory since May 1 for FHA loans underwritten through an automated underwriting system. 

Several lenders, some who have been using the TOTAL Mortgage Scorecard for several months prior to May 1, have reported problems during underwriting and endorsing. Some lenders have experienced very high Notices of Rejections (NORs) when loans have been submitted for endorsement.

The working group will meet regularly by conference call as a resource for lenders to discuss implementation problems, share solutions, and raise issues for MBA to discuss directly with FHA.
 
For more information or to participate on this working group, please contact Tim Doyle by phone at (202) 557-2860 or (tdoyle@mortgagebankers.org).
 
MBA Comments on a Proposed Rule on Use of Medical Records in Extending Credit
As required under the Fair and Accurate Credit Transactions Act of 2004 (FACT Act), the Office of Comptroller of the Currency (OCC), the Federal Reserve Board (the Fed), the Federal Deposit Insurance Corp. (FDIC), the Office of Thrift Supervision (OTS) and the National Credit Union Association (NCUA) issued a proposed rule designed to limit the sharing and use of information about consumers' medical history and current health status. Attached are MBA's comments related to the use of medical records in making an extension of credit in response to a proposed rule. These comments were filed on May 28.
 
The proposed rule intends to limit the sharing and use of information regarding a consumer's medical history and current health status. While MBA commends this purpose, in the comment letter MBA asks the agencies to consider circumstances where lenders use information that may be considered a "medical record." 

For example, credit policy guidelines allow underwriters to treat a medically-related bankruptcy more favorably than other bankruptcies. MBA also discussed a lender's evaluation of an applicant's mental capacity to enter a contract, the life expectancy of a borrower who has a terminal illness and workers compensation income in the agencies consideration of the rule. Further, we asked that medical information that is currently coded on credit reports to maintain the privacy of a consumer be excluded from the definition of a "medical record" so lenders can continue using the debt arising from medical care in underwriting.
 
For more information, please refer to the attached comment letter MBA submitted. For any questions or concerns, please contact Tim Doyle (202) 557-2860 (tdoyle@mortgagebankers.org) or Mary Jo Sullivan (202) 557-2859 (msullivan@mortgagebankers.org).
 
MBA Prepares Congressional Staff for Upcoming Homeownership Month
On Monday, May 24, MBA's monthly Congressional Education Series helped prepare Congressional staff for the upcoming Homeownership Month (June) by highlighting resources available for staff to conduct their own homeownership events for their constituents. The program focused on MBA's impending launch of the new Home Loan Learning Center, presented by MBA Vice President of Education and Business Development, Dan Thoms.
 
Thoms walked the audience through the Web site, demonstrating its impressive range of capabilities including a calculator that estimates monthly mortgage costs and compares them with the value of a home in a designated community. The Web site provides a basic framework for understanding the home buying process. MBA was also joined by Lloyd Lamois, director in the program support division of single family housing at HUD. Lamois described HUD Homeownership Counseling services designed to prepare first time borrowers for the purchase of their new home.
 
By partnering with HUD and working closely with Congressional staff, MBA hopes to make it clear to everyone on the Hill that we are committed to increasing homeownership rates in all communities throughout the country. 

For more information, please contact Adrienne Coyle at (202) 557-2815 (acoyle@mortgagebankers.org).
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