With the PDCF, the Fed will provide overnight loans to primary dealers, accepting a wide range of collateral, including investment-grade corporate securities, municipal securities, mortgage-backed securities and asset-backed securities for which a price is available. In effect, the PDCF allows primary dealers to have access to the discount window (which until now was only open to depository institutions with reserve accounts at the Fed) allowing a broad range of collateral.

The PDCF is the latest Fed’s effort to inject liquidity into the financial system besides the Term Auction Facility (TAF) and the Term Securities Lending Facility (TSLF). (The TAF offers funding to depository institutions via a bi-weekly auction for fixed amounts of credit, while the TSLF offered Treasuries securities to primary dealers for 28 days via a weekly auction in exchange for collateral including investment-grade private-label residential mortgage-backed securities.) 

Yesterday’s economic news continued to be bearish. Home builders’ confidence stabilized near its record low, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index remained at 20 in March, two points above the record low of 18 reached in December. (A value of less than 50 indicates that more builders view the market as unfavorable.) 

The survey asks builders for their sentiment about current sales, traffic of potential buyers and projected sales over the next six months. Both the indices gauging current sales conditions and traffic of prospective buyers were unchanged at 20 and 19, respectively. The index gauging sales expectations for the next six months edged down one point to 26. Builders reported that potential buyers are either reluctant to purchase or they are unable to qualify for a mortgage.

Another report confirmed deteriorating manufacturing activity seen in other indicators. Industrial production—a measure of the nation’s output at factories, mines and utilities—fell 0.5 percent in February. This is the largest drop since October 2007. The decline followed a 0.1 percent increase in January. 

Manufacturing output dropped 0.2 percent, also the largest decline since October. Utility output fell sharply by 3.7 percent, accounting for about half the decline in overall industrial production. This is the biggest decline since March 2006. Mining output rose 0.4 percent, partially reversing a 1.3 percent decline in January.
 
The industrial production report showed that capacity utilization—which measures a portion of plants in use and thus a gauge for inflation pressures—dropped from 81.5 percent in January to 80.9 percent, the first reading below 80 percent since November 2005.  

Capacity utilization has fallen in five of the past seven months and is now 1.5 percentage points below its recent peak in the summer of 2006. The rate averaged 79.6 percent over the past five years.

The decline in manufacturing output corroborates the drop in the Institute for Supply Management (ISM) manufacturing index. The ISM manufacturing index fell to 48.3 in February, the lowest reading since April 2003 and the second reading below 50 (indicating reduced manufacturing activity) in the past three months. 

Manufacturing activity may decline further in March. Yesterday, the New York Fed released the Empire State Manufacturing Survey, which is the first regional Fed survey for March. The index fell 10.5 points to minus 22.2, the lowest reading since the series' inception in July 2001. A reading below zero indicates a contraction in the manufacturing sector in the region. The index was 2.6 points below the previous record low in November 2001, when the economy was in a recession.

The Treasury market rallied, causing the prices to surge and yields to drop as funds moved from the stock markets in a flight to safety. The yield on the three-month Treasury bill declined 17 basis points to 0.99 percent. Long-term yields also declined but the decline is more moderate. The yield on 10-year Treasuries hovered around 3.30 percent by mid-Monday afternoon, 15 basis points lower than rate on Friday. Fed funds futures fully priced in one percentage point cut in the fed funds rate when the Federal Open Market Committee meets today.

(Orawin Velz is senior director of economic forecasting with the Mortgage Bankers Association. She can be reached at ovelz@mortgagebankers.org.)
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Douglas Elmendorf, senior fellow at The Brookings Institution, called for extending FHA refinancing eligibility guidelines that are currently limited to borrowers who make payments but are delinquent only because of a rate reset on their adjustable-rate mortgages. Such measures, part of FHA modernization legislation on Capitol Hill, are also a key policy agenda item for MBA.

“It should include some fixed-rate mortgage borrowers but limit it to those who have a history of making mortgage payments, avoiding those who want to play the investor game,” Elmendorf said.

Elmendorf noted that FHA does not operate on a heavily marked market and that its liability levels are not that high. “FHA’s share of the market is quite small and if we expand its ability and it takes on more mortgages when house prices are going down, it raises risk,” he said. “But it depends on how parameters are set and the tradeoff is that more people will be able to afford mortgages. However, the more risk the government takes on, the tighter the underwriting standards and amount of down payment must be. It has to strike a balance in a cautionary way.”

Marguerite Sheehan, senior vice president at JPMorgan Chase, New York, also expressed support for FHA modernization. “It is important in the current environment to not only refinance but also for new customers who need loans,” she said. “The conforming loan market has tightened credit and market spreads on GSEs have tightened up.”

Sheehan called for “modest” modification of the FHASecure program—to make it available to more homeowners to refinance. Michael Barr, professor at the University of Michigan Law School, agreed, saying FHA should participate more through new programs and affordable loans. He added that funding local nonprofits that help in dealing with the “very real crisis” is important in response.

“There is growing consensus of the housing crisis and its spread to other markets," Barr said. “The industry needs find a way to get homeowners into affordable loans that are sustainable, avoiding future foreclosures. An ideal of shared responsibility among the market could help —borrowers and the government—for the crisis we are in.”

Sheehan supported efforts by Sen. Charles Schumer, D-N.Y., to further fund counselors. “Counselors have been beneficial and the process that we put in place [at JPMorgan Chase] is important and deserves to be supported,” she said. “Also, local and state finance agencies and caps to their bonding authority could be beneficial. It requires, firstly, making programs available not for only purchase but for refinance and secondly, they need additional room for additional caps.”

Elmendorf also advocated funding state and local initiatives. “Direct money to states and localities—define what sort of money can be used and how it can be used to help local communities,” he said. “Do we have ways to direct it correctly?”

Elmendorf suggested writing down principals where it would be less costly for investors—clarifying legal liability to maximize total payoff and not worrying about pieces and parts of the mortgage. “As we know, it’s very complex to look at all the pieces,” he said.

Sheehan noted that “servicers have an accepted process to go through and evaluate portfolios that will help them make those determinations and help deserving homeowners. There are opportunities for resets where you own the loan or portfolio lenders—to make principal reductions. But still, there is lack of clarity.”

“The means needs to be found to infuse increases in capital into the financial intermediaries so they are able to increase volumes while remaining creditworthy so as to offer a resolution of these difficulties,” said former Treasury Secretary Lawrence Summers, now a professor at (and former president of) Harvard University, Cambridge, Mass. “They won’t be relying on voluntary private action in pursuit of individual shareholder interest.”

Barr also called for finding a way to “unfreeze” capital markets and allow a better flow of capital. Through a plan developed at the Center for American Progress—the SAFE loan plan—bulk transfer of mortgages that are potentially in distress from existing holders in an auction process are unfrozen and remarketed.

“The servicer puts up a collection of loans and the buyer, a new lender, purchases the collection in bulk—a pool of loans—transmitting an efficient process rather than a loan-by-loan modification,” Barr said. “The existing holder would provide loan-level and servicing information and other records.”

Elmendorf advocated a more case-by-case basis approach to the foreclosure problem, saying that all borrowers cannot be helped but each case should be reviewed on an individual basis.

“Many families that will face foreclosure deserve public help to stay in their homes,” Elmendorf said. “There are also other families who face foreclosure who are less deserving of government help and will not able to stay in their homes even with any reasonable amount of help. It is an unfortunate truth and implies that solutions to the mortgage mess need to distinguish among households.”

Even in very good years, many families lost their homes because they got into mortgages that they couldn’t afford or through life events, such as job loss or illness, Elmendorf said. “On average, about one quarter-million to a half-million people lost their homes when the mortgage market was good. Any effort to help all homeowners will require tremendous amount of money and distinguishing between households.”

MBA focuses on creating policy that does not increase costs for future mortgage borrowers and is limited to owner-occupants. "We shouldn't aid borrower's who committed fraud and modifications should be based on market value, Carlisle said. "The framework should also consider tax ramifications and accounting rules. Restructuring debts will have accounting rules for investors or lenders, possibly making programs less valuable."

Kenneth Wade, CEO of NeighborWorks America, Washington, D.C., observed that “it’s a clear challenge at the street level and is complicated by the way these loans are securitized. There are a variety of challenges—one servicer said the process is like hand-to-hand combat. A lot of the efforts taking place are on a one-off basis without a lot of guidance on what is possible and what is not possible.”

Wade called for creating opportunities for borrowers to refinance—opportunities that are driven by borrowers’ ability to pay where a “sustainable homeownership opportunity” exists. “Get mortgages out of these securities or some other vehicles that allow for greater flexibility,” he said. “We have to have tools—using FHA and VA—to refinance people into sustainable mortgages that will work.

Wade also expressed concerns about rising inventory of real estate owned properties, noting that “if we don’t get a handle on that, and it is heavily concentrated in some areas, it will lead to destabilization of communities. When we are making progress in one area, problems could further exacerbate in others. And what happens is these properties enter the cycle when investors pick them up again and put a little paint on them and try to flip them. Foreclosed properties go through the foreclosure cycle two or three times over and they don’t help create stability.”
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INTEGRA Partners with CSI
INTEGRA Software Systems, Franklin, Tenn., integrated Southfield, Mich.-based CSi’s IntelleDoc Solutions, a documentation system for its bank, credit union and mortgage lending customers.

CSi IntelleDoc Solutions includes a suite of software compliance components incorporating static and dynamic document libraries, automated document selection, customized disclosures, a document customization tool and compliance support for all states and for all types of lending transactions.

Informative Research Announces Upgrades, Launches Service for Reverse Mortgages
Credit reports issued by Informative Research, Garden Grove, Calif., include a new feature that allows mortgage originators to instantly view critical borrower score information and access credit score improvement tools. The feature, Credit Advantage, is provided free of charge on every Informative Research credit report and presents high, middle and low scores from all three credit bureaus in a table on the first page. Links below each score provide single click access to the company’s online credit simulation and optimization service offerings.

The company also introduced a new credit report designed exclusively for reverse mortgage originations. The report provides a mix of borrower credit and property information and consolidates FICO scores, mortgage related tradelines, collections and employment data, plus alerts and a creditor information list.

Whitebirch Debuts Planning 7.0
Whitebirch Software Inc., Salem, Mass., a provider of business planning, forecasting and budgeting software, launched Whitebirch Planning 7.0, which offers tools to customize planning models to meet financial and/or operational requirements of businesses. The product extends Whitebirch Planning’s library of standard financial objects, called Business Building Blocks, with business-specific logic. New Line Item Sets have also been added that can automatically reference multiple line items for use in formulas and reports, regardless of when or where those lines are added to the model.

Whitebirch Planning 7.0 also includes several features that allow routine planning tasks. Among the upgrades are a set of reports for detailing specific lists of business building blocks, an upgrade to ‘find and replace’ that supports title prefixes and suffixes, self-reference support for formula projections and modifications to objects that allow accumulated depreciation and amortization to be reported as negative values.

Mortgagebot Announces Hyperlocalization in Mortgage Marvel
Mortgagebot, Mequon, Wis., announced ‘hyperlocalization’ updates to its Mortgage Marvel service, an ad-free mortgage shopping web site. Mortgagebot provides online mortgage application technology for more than 800 banks, thrifts and credit unions nationwide. The new hyperlocalization capabilities display the exact office and branch locations of Mortgage Marvel lenders, including links to each lender’s web site.

Using three pieces of anonymous, property related data, Mortgage Marvel provides borrowers with mortgage quotes from local lenders. Consumers get rates and fees which are created from loan product databases of mortgage lenders that use the Mortgagebot PowerSite system for taking online mortgage applications.

Thoroughbred Technologies Launches Version 2 OPUS PCA
Thoroughbred Technologies Inc, Sugar Land, Texas, a developer and implementer of OPUS Records and Information Management software, transitioned into the mortgage post-close audit workflow marketplace by introducing OPUS PCA Version 2, a post-close audit workflow software product.

The company offers a single platform product that provides loan review, loan exception management and trailing document tracking for post-close loan management. An additional backend module serves as an interface between legacy systems, such as the loan origination system or the loan servicing system and provides OPUS PCA content data required for the user of each workgroup.

Data Empowerment Launches Record, Information Management Service Firm
Data Empowerment Group, Henderson, Nev., launched recently to meet clients’ records and information management needs. RIM is an element in a corporation's compliance package which includes SOX as well as new discovery related federal evidentiary rules.

DEG designed and implemented enterprise content management systems and field tested products and services for clients that include ECM and software companies, investment firms, banks and others in the financial services industry. The launch of the company coincides with the government's Federal Evidentiary Rules of Discovery that have created a demand for RIM compliance to avoid judgments and legal defense costs.

Interthinx Questions $11 Billion in Loan Applications
Interthinx, Agoura Hills, Calif., a provider of mortgage fraud detection products, announced that it uncovered more than 42,000 mortgage applications containing misrepresentations of borrowers’ income—loans totaling nearly $11 billion. The applications were all originated and submitted for Interthinx review in the last six months of 2007.

The loans were discovered when Interthinx analysts determined that its FLEX (FraudNET Loan Exchange) program had generated 42,610 income alerts. The Income Alert warns clients that a borrower has submitted multiple applications and that the borrower’s income as reported has jumped by at least 15 percent within a prescribed period of time. The Income Alert signals that a borrower or another party involved in the transaction has manipulated the reported income to qualify for a loan that would not be made if the true income were disclosed.

FLEX is a program that allows lenders to leverage data from all other Interthinx clients to assess the consistency and veracity of a given application. Interthinx is also evaluating data for FLEX Occupancy and Straw Buyer alerts. The Occupancy Alert is triggered when a borrower submits applications for multiple owner-occupied properties within a prescribed period of time. The Straw Buyer Alert is triggered when the same subject property appears on applications from different borrowers within a prescribed period of time.

Freddie Mac Seek Comments on Appraisal Code of Conduct
Freddie Mac, McLean, Va., announced a comment period from mortgage industry participants on implementation of its Home Valuation Code of Conduct, which sets out standards designed to enhance appraiser independence. The Code is being adopted as part of a March 3 agreement with New York Attorney General Andrew Cuomo and the Office of Federal Housing Enterprise Oversight. The Code establishes requirements governing appraisal selection, solicitation, compensation, conflicts of interest and independence.

Pursuant to the agreement, beginning January 1, 2009, Freddie Mac will only buy mortgages from lenders who adopt the Code with respect to mortgages sold to Freddie Mac. To implement the Code with minimal disruption to the market and, as required under the agreement, Freddie Mac requesting comments on operational and implementation issues, as well as possible unintended consequences.

Written comments must be submitted and post-marked by April 30 to Home Valuation Code of Conduct Response, Attn: Senior Vice President, Credit Risk Oversight Freddie Mac, 1551 Park Run Drive, Mail Stop D2Z, McLean VA 22102-3110. Comments must be sent by regular mail, express delivery, or electronically through a special information site on Freddie Mac’s web site at http://www.freddiemac.com/singlefamily/home_valuation.html.

ChoicePoint’s MARI Introduces New Loan Fraud Alert Service
The Mortgage Asset Research Institute, Herndon, Va., a ChoicePoint company, announced release of its new MARI Loan Fraud Alert Service. MARI LFAS is a mortgage industry-contributed loan process database that enables lenders and investors to identify potential application risk, patterns of fraud and hidden relationships among transaction parties.

LFAS compares a lender’s loan-level data, which includes borrower, collateral and professional information, against industry-contributed loan application data during the origination process. The match logic identifies patterns such as multiple closings for a single borrower, undisclosed second escrows or mortgages for the same property, inflated appraisals for the same property within a short period of time and multiple loan applications for the same property. It helps recognize application inconsistencies and common patterns that may be indicative of fraudulent activity.

VeroFORECAST Unveils New Forecasting Technology
Veros Real Estate Solutions, Santa Ana, Calif., a provider of enterprise risk management and collateral valuation services, recently released its latest, quarterly forecast of the nation’s residential real estate markets. The forecasts, based upon the VeroFORECAST models, reflect projected market gains and declines for single-family residences in most major metropolitan areas and a large number of non-metro areas resulting in coverage of 75 percent of the nation’s population.

Independently or combined with Veros’ Risk-Based Default Management process (that includes traditional and default/REO AVMs as well as market risk scores), these forecasts allow servicers and investors to determine collateral risk levels and establish a “priority of action” on their accounts, manage likely default exposure and make more effective decisions about non-performing assets. The forecasted subject value allows the servicer to view the expected change in price for up to 18 months into the future. This permits the servicer to immediately quantify any potential risks as compared to being forced to react at a later point in time.

Lend America Expands FHA Programs
Lend America, Melville, N.Y., a privately owned direct-to-consumer residential mortgage lender with a core focus on originating government-insured loans, announced an additional “stimulus package” in conjunction with new higher approved loan limits for Federal Housing Administration (FHA) loans.

Lend America has hired more than 300 employees from firms such as American Home Mortgage, New Century, Delta Funding as well as others over the past year. The majority of these new hires are loan officers which have been trained in FHA lending regulations and Lend America’s consultative approach. The company is now licensed to do business in 33 states and anticipates being approved to originate in 14 additional states within later this year. 

Lend America launched its own “stimulus package,” designed for FHA refinances. Homeowners who refinance with Lend America using FHA financing, will receive a $1,200 housing stimulus closing cost credit, or in some cases, cash at closing. 

Commercial Lenders Tap Hyland
Two top 10 commercial lenders, Principal Global Investors and Capstone Realty Advisors, have selected OnBase, a document management software service developed by Hyland Software Inc., Cleveland, Ohio, to electronically capture and store loan documents. 

Capstone chose OnBase to provide electronic access to thousands of pages included in each loan file. Using OnBase, Capstone officials said they have enhanced employee productivity and improved communication among the company’s eight remote branches and the Cleveland home office by allowing multiple employees to access the same file at the same time.

Principal Global Investors chose OnBase to electronically store correspondence, mortgage documents, servicing agreements, electronic documents and other financial documents the company accumulates in the process of doing business. OnBase also manages, processes and ensures the security of Principal Global Investors’ documents.

Majestic Home Loans Goes Live with Loan Score’s Pricing Engine
Loan Score Decisioning Systems, Irvine, Calif., a provider of enterprise-class automated underwriting services, announced that Majestic Home Loans Inc., a wholesale residential mortgage lender, has rolled out its product and pricing engine, automated underwriting system, PDA Pricer application and broker portal to the lender’s entire broker network.

Loan-Score’s point-of-sale decisioning services automate MHL’s previous manual pricing and underwriting processes, designed to achieve increased efficiencies and elevated service levels.

Strategic Development Worldwide to Release Web Site Directory
Strategic Development Worldwide, San Diego, announced the upcoming release of its Mortgage Resource Information Services web site, a free web site directory that focuses on supplying the lending industry with a complete listing of residential collateral valuation products and services available. The directory is designed specifically for users of valuation products.

In addition to the directory listing, The Mortgage Resource Information Services web site includes a valuation Research Library that provides downloadable white papers, presentations and other documents provided by vendor members and general research information that will be useful in making vendor and product decisions. Visitors to the web site will have full access to all directory listings as well as the Research Library postings at no cost.

Wolters Kluwer Launches Mortgage Document Service
Wolters Kluwer Financial Services, Minneapolis, announced launch of a new mortgage document service, the Wolters Kluwer Financial Services Simplified Mortgage. The service is designed to help lenders and borrowers make the closing process for first mortgage and home equity loans simpler, faster and more affordable while complying with all federal and state regulatory requirements.

Through a U.S. patent-pending business process, the Wolters Kluwer Financial Services Simplified Mortgage permits the current recordable mortgage document to be split into two content pieces. The first piece is a two to three page recordable instrument that contains all information required to create a valid lien and fully comply with the recording requirements of each state. The second piece is a non-recordable supplement that outlines a loan’s standard covenants between the lender and borrower.

SRG Releases New Version of Warehouse Lending System
Street Resource Group Inc., Atlanta, a provider of technology and consulting services exclusively for mortgage warehouse lenders, announced the newest release of its flagship Warehouse Lending System.

The new version leverages use and interoperability of the Microsoft Web Server, Internet Information Services and a Software as a Service (SaaS) delivery model. The WLS is designed to be easier and less costly to implement and support moving forward, providing security, scalability and extendibility.

By moving to the open-standards of a web server architecture and employing secure HTTP and XML communication protocols, SRG was able to create a more firewall-friendly system, eliminating the need for special configurations on individual systems.

eLynx's uSign Expands Lender Control of Signature Processes
eLynx, Cincinnati, a portfolio company of American Capital Strategies Ltd., announced the next generation of its electronic signature services. Part of the eLynx Expedite platform, the latest release of uSign enhances multiple capabilities including greater control and visibility of documents, a seamless consumer experience and richer enterprise branding.

The uSign release is aligned with lenders' goals to reduce costs and improve the borrower experience. It puts reporting and monitoring capabilities in the hands of all enterprise stakeholders. Individual agents can follow up with borrowers to capture more business, while managers and executives can view the performance of their teams.
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The CMT designation is presented to information technology professionals, including managers and executives, in recognition of their industry experience, professional education, and their knowledge of the unique technological needs of the real estate finance industry.

The following professionals earned the CMT designation:

• Mark Damon, CMT, senior project specialist, AIG United Guaranty;
• Arsen Ovanessoff, CMT, AMP, chief information officer, WLT Capital Corp.;
• David Walton, CMT, chief technology officer, Fiserv Lending Solutions; and
• David Zugheri, CMB, CMT, president, First Houston Mortgage Ltd.

“These four distinguished professionals have demonstrated their comprehensive knowledge of information technology; they are no doubt mortgage technology experts and the CMT validates that,” said John Golden, MBA’s senior vice president of education. “It’s paramount that companies continue to support the education efforts of industry professionals, like those of industry technologists, even during challenging times. It’s programs like the CMT that truly benefit the broader mortgage banking industry, not just those who hold the designation.” 

To be eligible for designation consideration, candidates must meet rigorous standards. They must have a minimum of two years’ industry experience, have a technology background and be in a technology leadership position within the residential or commercial real estate finance industry. They must also acquire 75 points in industry experience, education and participation.

After meeting the point requirements, candidates then submit a thesis on a specific initiative, implementation or conversion in which they actively participated and then must pass a two-part oral presentation/exam conducted by a panel of industry experts. Designees must also meet continuing education requirements every two years to remain in active status.

To learn more or enroll in the Certified Mortgage Technologist designation program, visit www.campusmba.org or call (800) 348-8653.
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Wells Fargo joins four other entities that have completed SISAC’s accreditation process, including eValid8 Corp.; Innov8IT LLC; the longstanding accredited issuer, VeriSign Inc.; and ChosenSecurity Inc., in partnership with the National Notary Association.

“It’s wonderful to see that prominent industry companies like Wells Fargo see the immense value that  information security accreditation brings to their business and are taking the necessary steps to meet industry standards,” said Robert Story Jr., CMB, MBA’s vice chairman and chair of MBA’s Board of Directors Technology C ommittee (BoDTech). “We’re particularly glad to see that companies are continuing to invest in technology and vital initiatives such as information security even during these challenging times.”

SISAC was created four years ago by MBA to accredit and certify secure online identity providers. This accreditation structure allows individual firms to establish various levels of “plug and play” identity within the context of secure e-commerce transactions for use over unsecured networks, such as the Internet.

SISAC addresses three essential missions for the industry:

• Educate and promote the use of secure identity within commercial and residential real estate finance;

• Create the necessary infrastructure for accrediting third parties providing secure identity products and services, such as technical, auditing and insurance solutions; and

• Leverage identity management best practices to establish open standards for trust in the mortgage industry.

“Wells Fargo recognizes the risk mitigation value that strong authentication provides within the electronic processes for both the enterprise and external partners,” said Chris Burckhardt, chair of MBA’s Residential Technology Committee (ResTech). ”MBA encourages more lenders to seek SISAC accreditation so their proactive efforts to protect the personal identifiable information of their customers can be acknowledged.” 

As America’s mortgage industry moves toward an electronic rather than paper-based paradigm, MBA intends to set mortgage industry standards for secure identity and to provide the platform for industry-wide eCommerce that will benefit all participants. Open access and standards is the motivating force behind MBA's efforts to establish data security, digital signature and encryption recommendations.

Story said as secure identity solutions continue to gain adoption in the mortgage industry, it is important for MBA to encourage their open development and to embrace open standards available to all industry participants in mortgage transactions. Openly developed secure identity will increase interoperability between all trading partners and facilitate faster migration to safer electronic transactions and eMortgages for all sectors of the mortgage industry—residential and commercial, origination and servicing, lender and vendor. Ultimately, the interaction between users of accredited online identity solutions will realize increased efficiencies and new business opportunities.

For further information on mortgage security standards and SISAC, visit: www.sisac.org.
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• Coverage of early sessions from the Mortgage Bankers Association’s National Technology in Mortgage Banking Conference & Expo in Dallas;

• The mortgage industry faces a decision: SMART® Docs or PDF—or both. Monte Larsen, chief marketing officer with Idaho Falls, Idaho-based DocuTech, compares and contrasts in Tech Forum.

These stories and more in MBA Tech NewsLink, a weekly newsletter focusing on mortgage technology issues from the Mortgage Bankers Association. Delivered by email every Tuesday morning, MBA Tech NewsLink provides news and information about mortgage technology, MISMO and op-ed articles from technology experts, including value-added stories you won’t see in MBA NewsLink.

MBA Tech NewsLink is available through a free subscription for MBA members; to start getting your subscription, send an email to Gloria McCullough at gmccullough@mortgagebankers.org or call 202/557-2944.
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For industry technology staff at the Mortgage Bankers Association and for volunteer members of MBA’s Residential Technology Committee (ResTech), the groundwork continues to be laid down and the opportunities promising, despite the real estate finance industry’s current down cycle.

“At the end of the day, it’s all about data and understanding the data,” said Harry Gardner, MBA’s vice president of industry technology, speaking here at MBA’s National Technology in Mortgage Banking Conference & Expo. “Given the turmoil in the industry today, understanding that data is even more important.”

Chris Burkhardt, chief information officer at Pulte Mortgage LLC, Englewood, Colo., and ResTech chair, said one challenge facing technologists is relevance, noting that at a time when technology is more important than ever, companies face larger issues—such as survival.

“Many of our business owners are distracted and thinking about other things, and technology is not one of them,” Burkhardt said. “Liquidity; legislation; regulatory changes—sometimes as a technologist, it’s difficult for us to say, ‘here’s how we can help.’”

“It’s about prioritization and use of resources,” Gardner said. “Within the industry there is clearly a balancing act that is taking place between business realities and long-term technology strategies to build business for the future.”

Burkhardt identified several key themes going forward for industry, the first being information. “When you think about the mortgage industry, it’s all information,” he said. “it’s our job to make sure that information is accurate. And our ability to manage and process that information is core to our business.”

Burkhardt also identified effective interoperability and customer service as core themes. “It wasn’t so long ago that a single company could do the whole thing; today, we have many trading partners,” he said. “And the customers we deal with today expect things differently today than we did 20 years ago. We deal with information all of the time, instantly, and customers are going to drive technology.”

If you can do all those things—information, process management; interoperability and customer service—“you’re going to succeed,” Burkhardt said. “And they’re all entirely driven through technology. So we have the opportunity to make this work for us.”

MISMO, the data standards subsidiary of MBA, has been a “big success story,” Burkhardt said. “Some of these challenges are bigger than all of us, and that’s why we have MBA. MISMO defines industry standards for data, information and the ability to share that information. MBA has done a fabulous job of making MISMO a reality for us.”

Looking ahead, Burkhardt and Gardner identified eMortgage adoption—something that’s been talked about for more than a decade yet still not in widespread use—and information security as critical issues facing the industry. “When you look at the fact that the mortgage transaction is still largely a paper process, this provides a tremendous competitive opportunity for our industry,” Burkhardt said.

To that end, MISMO has created an eMortgage Guide and an eMortgage Starter Kit. “There are problems in the paper mortgage that technology can solve,” Gardner said. “Electronic processes, when formatted, can vastly improve processes.”

Burkhardt said information security continues to be a key challenge. “When you think about what we hold from a customer information perspective—we hold so much information about our customer’s information,” he said. “We all recognize that it’s a tremendous responsibility. We think it’s particularly important for the small and mid-sized companies We want to help them, so we’re providing tools and education so they can protect their information as well as the big guys.”

Despite the current challenges, Burkhardt and Gardner called the current situation exciting for the industry.

“For those who are new in the industry—over the past 10 years—we’ve only seen a growth cycle,” he said. “But we’re in a cyclical industry. We’ll get back to a period of growth. We have to help our leaders understand the role of technology in helping them grow. When this is all done and the dust settles, we’re going to be stronger than ever.”
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The recent slowdown in the mortgage markets weeded out some players who, according to some participants here, had no business being in the industry in the first place. Those who remain are leaner, sharper and looking for new opportunities.

“A long time ago, I learned that technology could level the playing field for smaller companies competing with big ones,” said MBA Vice Chairman Robert Story, CMB. “But today we're in a slightly different phase—it’s not so much about individual firms gaining a competitive advantage; rather, the whole industry adopting some very important systems and practices. Systems that won't be cloaking or hiding data, but increasing transparency, without sacrificing security.”

Story noted that MBA continues working on improving data flow and data purity. “That way, as information moves through the mortgage process, investors and rating agencies can have a better understanding of exactly what they're buying and rating,” he said. “That kind of clarity will go a long way in preventing some of the problems we face today, in a way that won't restrict growth."

Story lauded MISMO, whose adoption continues to spread. "MISMO itself is getting better, with the introduction of the Version 3 architecture, he said. "Because the entire MISMO platform is moving to XML schema, transactions will have greater interoperability and efficiency. With everyone speaking the same language, we all save money.”

Story echoed a point made by many participants here—that the current market offers opportunities for smart companies.

“Let's face it, no one is going flat out, pedal-to-the-metal any more,” Story said. “There is time to tweak, to adjust, to get things right. Now is the smart time to implement. So, talk to your associates in language they'll understand…scalability, efficiency, quality control, better data flow—these core values don't change with business cycles. So when volume picks back up—and it will—we'll be ready; but we'll also be more efficient right now. And your company will have a better handle on its hiring needs when that time comes.”
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