The guidance identifies “risk factors” that the agencies said could create vulnerability for borrowers as interest rates increase. Those risk factors exist in products such as home equity lending programs, including open-end home equity lines of credit (HELOCs) and closed-end home equity loans (HELs).

“The rise in home values, coupled with low interest rates and favorable tax treatment, have made home equity lines of credit and loans attractive to consumers,” the agencies said. “To date, delinquency and loss rates for home equity portfolios have been low, due at least in part to the modest repayment requirements and relaxed structures of this lending.”

Doug Duncan, chief economist with the Mortgage Bankers Association, said the guidance is a “warning shot across the bow” for lenders offering various loan products. “The agencies are signaling that they are going to be monitoring the portfolios of these products,” he said. “It’s not surprising, given the heat in the housing market today.”

The guidance—issued by the Board of Governors of the Federal Reserve System; the Federal Deposit Insurance Corp., the National Credit Union Administration; the Office of the Comptroller of the Currency; and the Office of Thrift Supervision—identifies the following “risk factors:”

• Interest-only features that require no amortization of principal for a protracted period;
• Limited or no documentation of a borrower's assets, employment and income;
• Higher loan-to-value (LTV) and debt-to-income ratios;
• Lower credit risk scores for underwriting home equity loans;
• Greater use of automated valuation models and other collateral evaluation tools for the development of appraisals and evaluations; and
• An increased number of transactions generated through a loan broker or other third party.

The agencies said in development of any new product offering, product change or marketing initiative, management should have a review and approval process that is sufficiently broad to ensure compliance with the institution's internal policies and applicable laws and regulations and to evaluate the credit, interest rate, operational, compliance, reputation and legal risks.

“In particular, risk management personnel should be involved in product development, including an evaluation of the targeted population and the product(s) being offered,” the guidance said. “For example, material changes in the targeted market, origination source, or pricing could have significant impact on credit quality and should receive senior management approval.”

When HELOCs or HELs are marketed or closed by a third party, financial institutions should have standards that provide assurance that the third party also complies with applicable laws and regulations, including those on marketing materials, loan documentation and closing procedures, the guidance said. Management should have appropriate monitoring tools and management information systems to measure the performance of various marketing initiatives, including offers to increase a line, extend the interest-only period or adjust the interest rate or term.

Duncan said that while the guidance is not likely to have a chilling effect on lenders offering such products, it could make some lenders think harder. “It will probably make depository management take a closer look, because it’s probably an indication of where regulators will be looking.”

The Fed has been concerned for “some time” about this, Duncan said. “They want to make sure that safeguards are in place, so that there are no surprises to households about the quality of their equity,” he said.

Jay Brinkmann, MBA’s vice president for research and economics, said the guidance is also a signal to federal examiners, many of whom are not based in Washington, D.C. “It’s a signal to the field workers that this is an issue that they should be focusing on,” he said.
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AcaciaFund, New York City
America RisingSun Inc., Stanton, Calif.
Arizona Federal Credit Union, Phoenix
Asset Direct Mortgage LLC, Marietta, Ga.
Atlantic Capital Funding LLC, Wayne, Pa.
Atlantic Financial Inc., Beltsville, Md.
Bluetrust Capital LLC, Miami
Business Loan Store, Medford, Ore.
California Reverse Mortgage Co., Sacramento
Capital Benefit Mortgage Inc., Newport Beach, Calif.
Cash Fast Finance LLC dba Blue Financial, Phoenix
Coastal Federal Credit Union, Raleigh, N.C.
Columbia Mortgage Capital Corp., Gig Harbor, Wash.
Community Home Loans LLC, Lexington, Ky.
Community Mortgage Group Inc., Highlands Ranch, Colo.
Cornerstone Commercial Mortgage, Las Vegas
Cornerstone Home Mortgage dba MHI Mortgage, Winter Park, Fla.
Corvus Funding Inc., Irvine, Calif.
England Lending, Little Rock, Ark.
Fairfield Financial Mortgage Group Inc., Danbury, Conn.
Financial Capital Inc., Redding, Calif.
Foundation Trust Mortgage LLC, Arlington, Va.
Gotmortgage.com, Fountain Valley, Calif.
Gulfstream Capital Corp., Houston
Independence Federal Savings Bank, Washington, D.C.
Infinity Financial Services LLC, Rockville, Md.
Irvine Funding Corp., Irvine, Calif.
JZ Mortgage Inc., Walnut Creek, Calif.
Kaizen Mortgage Inc., Columbus, Ohio
Kubrick Financial Inc., Aliso Viejo, Calif.
Lexim Mortgage LLC, Birmingham, Ala.
Loan Center of California, Suisun City, Calif.
Mortgage Strategies Group LLC, Boca Raton, Fla.
National Mortgage Acceptance Co. LLC, St. Petersburg, Fla.
National Mortgage Network, Laguna Hills, Calif.
Nevis Funding Corp., Woodland Hills, Calif.
North Atlantic Mortgage Corp., Silver Spring, Md.
Ownit Mortgage Solutions, Agoura Hills, Calif.
Pacific Mercantile Bank, Costa Mesa, Calif.
Paragon Lending Solutions Inc., Aurora, Colo.
PetroConsulting Inc., Vienna, Va.
Precision Lending Group, Santa Ana, Calif.
Revenue Mortgage Corp., Irvine, Calif.
Rockaway Beach Financial, Pacifica, Calif.
Rockhall Funding Corp., Flushing, N.Y.
Sprior Investments, Huntington Beach, Calif.
The Grange Bank, Columbus, Ohio
United Mortgage Corp., Cape Coral, Fla.
Washington Financial Group Inc., Seattle
Westsound Bank & Mortgage, Silverdale, Wash.
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Currently, few educational opportunities exist to address employment law issues as they specifically impact this industry. In response to the need for this training, CampusMBA and the U.S. Department of Labor present Essentials on Employment Law Compliance Workshop.

Responsible for more than 180 employment laws, the Labor Department is responding with this initiative to help employers better understand their rights and responsibilities. The workshop is designed for human resource professionals and business owners in the mortgage banking industry who are interested in learning more about their rights and responsibilities under federal employment laws. Participants attending this workshop will learn about the employment laws that impact them and the steps being taken by individual enforcement agencies to help businesses navigate the road to compliance. 

Come to San Francisco on June 17 to hear Department of Labor and Equal Employment Opportunity Commission representatives summarize and provide updates on recent changes to federal employment laws, including the Overtime Security Rule.

Barbara Bingham, director of the Labor Department’s Office of Compliance Assistance Policy, is a workshop instructor. The office was created in November 2002 and is charged with raising public awareness of the laws DOL enforces. It also works to ensure that America’s employers and employees know where to go for help in complying with these laws.

Before assuming this position, Bingham was the acting director of regulatory policy in the Office of the Assistant Secretary for Policy, where she provided counsel on key policy issues, including DOL regulations and agency compliance assistance plans. She managed the department’s central policy-making body and the preparation of DOL’s Semiannual Regulatory Agenda. Bingham has been instrumental in the design and implementation of several of DOL’s most successful compliance assistance tools, and she has led the department’s efforts to make its statutory, regulatory and compliance assistance information available online at www.dol.gov/compliance.

Bingham will be joined by a team of experts from various DOL agencies and the Equal Employment Opportunity Commission. These speakers will deliver informational sessions on popular and timely compliance issues with specific employment laws.

Attendees of this workshop will:

• Learn how the Department of Labor can assist businesses owners and HR professionals in understanding their rights and responsibilities as employers
• Discover free tools and resources to help them comply with the Department of Labor's employment laws, thereby helping them avoid violations, investigations, and penalties
• Learn tips for achieving compliance with various employment laws, such as the Fair Labor Standards Act (FLSA), which regulates minimum wage and the recently revised Overtime Rules
• Realize increased productivity and reduced costs by being able to find answers to their employment law questions quickly, easily and free of charge

In addition, attendees of this event will earn two points toward MBA's Certified Mortgage Banker and Certified Mortgage Technologist designations.

Registration for the Essentials on Employment Law Compliance Workshop is $450 for MBA members, and $675 for non-members. The registration fee includes all training materials, seminar tuition, refreshment breaks, as well as lunch on the day of the event. The course number is E2501856 .

To register for this one-day workshop, click here, download the PDF registration form at www.campusmba.org/pdf/2004_cb_regform.pdf , or call (800) 348-8653. For more information, contact CampusMBA at campusmbaeducation@mortgagebankers.org or call (800) 348-8653.
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The first mortgage/acquisition financing was funded through a Southeast U.S.-based commercial bank that JFP & Co. serves as a loan originator. The condo-conversion financial transaction was the sixth condo conversion loan JFP & Co. arranged for the principals totaling $170 million during the past nine months.

“The loan has a term of  24 months at a rate of one quarter percent over prime, said Jim Perry, president of JFP & Co. “It represents 82 percent of total cost including an interest reserve, and renovation funds and it provides individual releases for condominium purchases."

The Winter Park Villas project, located on 12 acres in the eastern section of the City of Winter Park, roughly five miles northeast of downtown Orlando, was built in 1981. The property contains 138 rental units in 25 buildings with a net rentable area of 152,218 square feet.

The purchaser of the 138 unit rental apartment project is Winter Park Villas Group LLC, a Florida limited liability company of Miami whose general partner is Investors Capital Mortgage Group and RB-GEM Management LLC, a Florida limited liability company.

The borrower has a renovation budget nearly $400,000 and will start marketing sales of individual units within 30 days with sale prices ranging from $118,000 for the one-bedroom/one bath, $148,900 to $154,900 for the two-bedroom/two baths, and $176,900 for the three-bedrooms/2 baths units. The projected sell out of the condominium conversion is $20,312,200 or an average sale price of $147,190 per unit.

Total cost for the conversion project is $13.7 millino, including renovations, remodeling, closing expenses and marketing. The amenities for the project include a swimming pool, fire places in each unit, vaulted ceilings, washer/dryer connections, laundry rooms and 300 parking spaces.
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Please ask to join Beth Percynski'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 Initiatives Web site, http://www.mortgagebankers.org/state_update/.
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You can’t pretend that dealing with mountains of paper documents isn’t slowing down the post-close audit process. And you can’t ignore the reality that eMortgages are on the horizon and that they will affect the way you and your competitors do business.

To remain competitive in this ever-changing environment, you must increase efficiency, increase accuracy and decrease the time it takes to complete the post-close audit process. How can you enhance your efficiency today? What’s the best way to maximize your investment in process improvement and automation?

CampusMBA, the education arm of the Mortgage Bankers Association, can help. CampusMBA presents an Audio Program, “Automating the Post-Close Audit in a Hybrid World,” on Wednesday, May 25 from 3:00-4:30 p.m. EDT. This program will discuss alternatives and issues for automating the post-close audit process, including:

• Scanning–New improvements, whether you are working from paper or are already scanning;
• Faxes–Newer multi-function devices enhance the processing and use of faxes;
• Emails–Your inbox is inundated with new emails every day;   Leverage email and prevent it from becoming a time vampire
• Mixed packages –Considerations for loan packages that are part electronic, part paper
• Data entry–How can you lower the cost of data entry required for the process?
• Data validation–What are optimal methods for validating loan data?
• Business Process Management–What are current trends and best practices?  And how do you leverage them?

Industry expert Jim Henderson discusses how to increase accuracy and decrease the time it takes to complete the post-close audit process. Henderson has spent the past 10 years in business process automation, first as a systems engineer and architect and as president of KeyMark. KeyMark began with scanning, OCR and automated forms processing at state department of revenues and moved to automation of electronic and paper billing and mortgage loan processes using integrated business rules engines, workflow, unstructured forms processing and document management. He has served with the HIPAA Electronic Claims Attachment Subcommittee and has spoken at numerous industry events including AIIM, ARMA and AICPA.

It's never been easier to train your staff on the most current topics relevant to your business. CampusMBA Audio Programs allow you and your staff to listen to a 60-minute presentation by an industry expert, followed by a 30-minute interactive question and answer session. Just dial in from your conference room speakerphone to train your staff - whether there are two or 20 employees in attendance.

The PowerPoint presentation that accompanies the audio program will be sent via email one week prior to the program date and can be reproduced for all attendees.

CampusMBA Audio Programs are a timely, convenient and cost-effective way to train your entire staff on the latest topics. Why register for an Audio Program?

• Inexpensive—$225 for MBA members/$325 for Nonmembers per site;
• Timely topics—regulatory and sales strategy issues brought directly to your speakerphone and conference room;
• Quality—program presentation materials developed by industry experts;
• Simple—just use your speaker phone; and
• Current—latest topics brought to you in a timely way

To register online, go to the CampusMBA Web site, www.campusmba.org, or call (800) 348-8653.
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MXCompliance allows for implementers of MISMO's Internet-based XML standards to reference requirements and take steps in becoming officially compliant, according to MISMO, as well as validate their XML.

MXCompliance is necessary as the industry continues to advance while adopting MISMO standards, said Mike Bixby, a consultant with LandAmerica, Richmond, Va., and a member of the MISMO Board of Directors. "Due to the strong need for an industry-wide compliance system, MISMO has stepped up to the challenge by launching MXCompliance," he said. "This is no small feat and I commend MISMO on its leadership."

Three types of MXCompliance Services will be certified: Verification, Import and Export. Verification is a service for businesses interested in purchasing Certified Products and Services from organizations that claim they are MISMO-compliant. The Verification Service ensures that vendor products and services are identical to the products that were MXCompliance certified. The Import and Export Services are used by applicants seeking certification of their product or service interfaces against MISMO standards.

The cost of MXCompliance ranges from $500 to $1,000 per transaction being certified. A suite of MXCompliance trademarks have been designed that will be licensed to those organizations that pass the compliance standards successfully. Recertification will occur annually.

MISMO has been and continues to accept specifications from other MISMO workgroups to establish minimum requirements, as MISMO plans to expand and make this service available for other transaction areas in the future. It is expected that the mortgage insurance area will be the next to debut. SMART documents and an eMortgage compliance service are anticipated by year's end.

For further information, visit: http://mxcompliance.mismo.org/
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