In the letter, MBA Chairman Michael Petrie, CMB, AMP, said the Massachusetts law, the Predatory Home Loan Practices Act, “raised concerns among mortgage lenders in your state and nationwide and dramatically illustrates the need for a uniform national law to protect homeowners from abusive lending while, at the same time, avoiding unnecessarily higher mortgage costs.”

The Massachusetts law, which went into effect last month, contains an “anti-flipping” provision that extends to all home loans—not just high cost loans—and a “safe harbor” from assignee liability for high cost loans. But MBA asserted that both provisions are “flawed” and unclear.

For example, the anti-flipping provision does not offer clear standards, while the safe harbor “offers little to assure the continued availability of beneficial liquidity.”

In response to enactment of the Massachusetts law, Fitch Ratings, New York, said it would no longer rate transactions that contain Massachusetts high-cost home mortgage loans. Additionally, Standard & Poor’s, New York said it would not permit the inclusion of such loans in bond deals it rates “because the Act does not clearly limit the liability of assignees for violations.” Fannie Mae and Freddie Mac also announced that they no longer plan to buy high-cost mortgage loans in Massachusetts.

“As the consequences of the Massachusetts law demonstrate, state laws—no matter how well intended—can have severe consequences, including denying the dream of homeownership to those who we are all working to serve,” Petrie wrote.

Frank is the ranking Democrat on the House Financial Services Committee. Two colleagues on his committee—Rep. Robert Ney, R-Ohio, and Paul Kanjorski, D-Pa.—have signaled their intent to introduce a bill next year that would provide a federal standard for predatory lending practices.

Petrie told Frank that the Massachusetts law represents a microcosm of the problems that a patchwork of state and local predatory lending laws presents to lenders. “Beyond the particular compliance problems presented by the Massachusetts law, the fact that the law differs from the laws of other states and communities is itself a problem,” he said. “The context of the law, of course, is that other states and communities are passing their own laws to achieve the same goals. As of today, there are some 30 states and more than a dozen communities with laws to combat abusive lending. Each one is unique. These differences increase compliance costs that ultimately are borne by borrowers.”

Additionally, Petrie said, some national players have chosen not to lend to people in some states, while others have chosen not to lend to certain portions of the market, decreasing competition and increasing costs for borrowers. “I think we all can agree that the answer to the problem of abusive lending is not to remove some of the most-respected national financial institutions from this market segment. Sadly, that is what is occurring today,” he said.

Frank’s support of a federal predatory lending statute, Petrie said would “regularize compliance and facilitate competition.” 
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Refinancing volume fell substantially last quarter below levels seen in previous quarters. During the period of intense refinancing, HPI increases could be down because appraised values used for refinancing mortgages with low loan-to-value ratios (LTV), which may not have kept up with recent market price increases.

Metropolitan Statistical Areas (MSAs) were revised to represent the areas defined by the Office of Management and Budget (OMB) in 2003 and based on 2000 Census data. As a result, the report now includes house price index data for 25 additional MSAs.

Over the past year, Nevada's house prices grew by 35.78 percent, the largest HPI increase for any state. Development of commercial property in Las Vegas continues while unemployment is minimal and appreciation in the metro area of Las Vegas-Paradise was 41.74 percent, the most for any MSA.

Rounding out the top five states for annual house price appreciation are Hawaii (28.29 percent), California (27.18 percent), the District of Columbia (23.95 percent) and Rhode Island (22.54 percent).

OFHEO's House Price Index is published on a quarterly basis and tracks average house price changes in repeat sales or refinancings of the same single-family properties. OFHEO's index is based on analysis of data obtained from Fannie Mae and Freddie Mac from more than 28.8 million transactions over the past 29 years.

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BB&T Corp., Winston-Salem, N.C., ranked third in the nation in customer satisfaction for residential mortgages, according to Westlake Village, Calif.-based J.D. Power and Associates 2005 Home Mortgage Study, based on responses from more than 11,000 home mortgage customers and national home mortgage providers.

BB&T ranked behind USAA, a San Antonio, Texas-based mutual insurance company, which specializes in the military community, and World Savings, an Oakland, Calif.-based thrift.

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The Cendant Real Estate Franchise Group, New York, launched the LeadRouter system, an lead management platform for the brokers within its Century 21, Coldwell Banker, Coldwell Banker Commercial, ERA and Sotheby's International Realty brand networks. The software-based system captures Internet leads from homebuyers and sellers, and then matches the lead information with the most appropriate sales associate according to business rules established by the local broker/owner. Converting data to voice, the LeadRouter product informs the sales associates of the lead via phone.

The system also provides office managers and administrators with oversight tools for managing all customer leads as well as Internet leads from any Web site. It also creates daily, weekly and monthly reports along with an integrated system that enables brokers to track the source of all their business. Additionally, sales associates must follow up on customer inquiries in order for them to continue to be eligible to receive leads from the LeadRouter system.

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Trinity Partners, Tucson, Ariz., launched its Digital Loan Management (DLM) product, a loan digitization and delivery platform. DLM supports imaging, indexing, retrieval and delivery of loan packages in electronic format to Calabasas, Calif.–based Countrywide Home Loans’ Correspondent Lending Division for purchase review.
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Deutsche Bank Berkshire Mortgage

DBBM used FHA's 223(f) refinance program for this loan, which allows for one-step processing under HUD's Multifamily Accelerated Processing (MAP) delivery system. Under FHA's 223(f) program, the loan could include non-critical repairs and capital improvements and the mortgagor would have up to 12 months from the loan closing to complete the repairs.

The loan, structured as a 35-year self-amortizing, non-recourse financing, was funded to 80 percent of value, which permitted the mortgagor to take out part of its equity in the deal, DBBM said.

Newport Village is a multifamily complex contained in five buildings located at 16991-17017 Merrill Ave. in Fontana. The 16991 Merrill Ave. building was constructed in 1979. The 17017 Merrill Ave. building was built in 1986. Amenities include a heated spa, playground and laundry facilities.
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High performance lenders must maintain a distinctive strategy while maximizing profits in the short term if they want to continue being a player in the industry going forward. Leading lenders are positioning themselves to survive and thrive for the long term by employing information technology to achieve lower costs and greater efficiencies. An important aspect of any high-performance business is the way it uses information technology (IT) to execute a specific strategy.

Jeanne Harris, associate partner, director of research and executive research fellow at the Accenture Institute for High Performance Business in Chicago and Jeffrey Brooks Accenture Institute research fellow in Boston, examine the changing role of IT in driving business performance at leading mortgage companies in the December issue of Mortgage Banking magazine’s “In the Mortgage Industry, IT Matters.”

For more information, visit www.mortgagebankingmagazine.com.
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Each year, MBA’s Future Leaders program delivers a highly regarded curriculum focusing on leadership and business management skills for the industry’s most promising professionals. Members of the Class of 2005 will participate in a series of three seminars focusing on leadership, business analysis and decision-making. 

Participants will be selected based on their professional and academic achievements and the recommendation of their company president or CEO.  Additional recommendations are encouraged. Preference will be given to those individuals with a track record of involvement with a state or local association.

To be considered, applicants must be:

• Real estate finance professionals with 3-15 years of experience
• Full-time employees of Regular or Associate MBA member firms or adjunct state associations
• Individuals who have demonstrated a commitment to a career in real estate finance through professional excellence and achievement

The tentative schedule of events:

Leadership Development and the Federal Legislative Process (held in conjunction with MBA’s National Policy Conference)
April 17 - 20, 2005
Washington, D.C.

Management Session
July 2005
Dates & Location TBA

Closing Session and Graduation Ceremony (held in conjunction with MBA’s 92nd Annual Convention & Expo)
October 23–26, 2005
Orlando

Tuition for the program is $2,500 per person. Participants will also be responsible for travel and accommodations related to each session. Because peer learning is an integral component of the curriculum, participants should commit to attend each session. 

To download an application, please visit http://www.mortgagebankers.org/future_leaders/index.html. If you have questions or would like additional information, please contact Leah Logan, senior director of MBA Membership, at (202) 557-2752 (llogan@mortgagebankers.org).

The application deadline is December 31–apply today.
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“I think it is where [business] is going and as things get more competitive, it is going to happen more and more,” said Guru Amrit Khalsa, president of Nationwide Processing in Herndon, Va., a business process outsource for 20 mortgage broker clients. In his Herndon office, Khalsa receives applications from mortgage broker clients such as Carteret Mortgage and 1st Metropolitan Mortgage, scans the file into a PDF on an encrypted data link to a file storage system in Bangalore, India.

“They do everything in India,” Khalsa said. “It’s not rocket science.”

Francesco Paola, vice president of sales and marketing at Trinity Partners, Inc., a business process outsourcing (BPO) service based in Tucson, Ariz., said there are new opportunities in India that were not there three or four years ago. Trinity processes loans out of India for an undisclosed large correspondent mortgage lender and other correspondent lenders.

Nationwide Processing and Trinity focus on reduced costs. To that goal, they hire “highly skilled, college-educated” workers in Bangalore at comparatively lower wages than stateside. Additionally, Nationwide Processing’s center in Bangalore and Trinity’s center in Gurgaon, India, do not use paper because they receive mortgage applications through scanned images.

“It is extremely efficient because it is much easier to process images,” Khalsa said.

Trinity uses its Digital Loan Management (DLM) system to process loans for U.S. correspondent lenders. “[DLM] is essentially an indexing and document delivery application,” Paola said.

Trinity’s infrastructure and networking operation includes a call center and hardware for data transfer. The company has a document management workflow system for existing applications overseas, and it custom-built applications to support processing loan documents in offshore locations. Trinity sends mortgage data through imaged files to India for application processing, purchase advice or reconciliation. Paola said Trinity purges the data within a week after closing or longer, depending on the client’s request.

“Technology allows us to continually optimize the process overseas,” Paola said. Trinity secures data transfer offshore, has physical security--such as badge readers at its offices in Gurgaon--and limits functionality for processors on its desktops.

Nationwide Processing set up an international private line circuit (IPLC) with Internet Protocol PBX (IPPBX). Khalsa said the IPPBX works through a data network rather than regular phone lines to provide a clear and reliable connection.

“The key to providing good outsourcing is to answer the phone right away and have an answer as soon as possible,” Khalsa said. “The problem in the U.S. is volume. In India, [loan processors] can do those 15 loans a month and still make a good living. When you’re doing that kind of volume [in the U.S.], it’s really difficult to give that kind of customer service. We’re a lot better at it because it’s all we do.”

Trinity said its clients can reduce costs by up to 50 percent in fixed and variable infrastructure and operational costs. The lower costs correspond to lower wages for loan processors in India, but those wages are respectable and upscale by India's standards.

Mortgage loan processors earn one-fifth of a U.S. loan processor by a conservative estimate, Khalsa said. Nonetheless, that wage would put a processor in India into an upper middle-class lifestyle. The turnover in India is also very low despite the nature of the business, as good processors remain well-paid by India's standards and some move up to middle management based on U.S. management processes, Khalsa said.

Paolo said mortgage processor skills at Trinity are as good if not better than in the U.S. Trinity hired college-educated processors from GE and Annex offices in Gurgaon as college graduate availability increases in India. Khalsa said four technical-oriented schools in Bangalore, the “Silicon Valley of India,” saturated the market with highly skilled and educated workers for hire.

While loan officers focus on sales activity, processors focus on the internal details, Khalsa said. But he noted the mortgage industry is “the classic model of fixed cost versus variable cost,” and although mortgage brokers want their costs to track revenue, the variable costs make it difficult for originators to justify in-house staff.

Paolo said Trinity is an “extension” of the correspondent lender who could use the BPO if strained by a refinance boom or retain staff if business slows down.

“It is another lever to squeeze as much efficiency as you can by partnering with an offshore provider,” Paolo said.
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