eVault: A secure electronic repository for eNotes and other e-documents.

"There are interesting technologies that enable bankers to re-evaluate and monitor their practices over time, and respond more quickly to change. Technology allows lenders to spot trends that could have caught them off guard a few years ago. They can re-evaluate almost instantly and respond effectively." --Cheryl Yaeger, president of BenchMark Consulting International, Atlanta.

HELOCS Show Industry Potential Using Technology
Sorohan, Mike
Home equity lines of credit (HELOCs) have proven greatly popular as the refinance boom eases off-for both lenders and borrowers. And according to Cheryl Yaeger, president of BenchMark Consulting International, Atlanta, a major factor in HELOC popularity is the ease in which technology has made such products possible.

"HELOCs continue to be the product of choice for consumers and lenders-they represent the lion's share of the current portfolio," Yaeger told MBA NewsLink. "One of the main drivers we see for that success is customer experience that is quick and easy. They are looking for something that is fairly straightforward and quick to execute. And that is becoming easier as lenders use technology."

The HELOC process has become almost painless, Yaeger said, particularly in comparison to the paper-burdened mortgage origination process. "From a consumer view, it's the difference between night and day," she said. "We're also seeing products that have become increasingly flexible. You can draw on the line for a fixed period for any number of loan items. It almost starts to resemble a commercial obligation, where borrowers can draw on a credit line."

According to industry research, last year Americans took out $431.3 billion in home equity loans and lines of credit-nearly 35 percent more than in 2003. As interest rates, consumer debt and new home purchases continue to escalate, the growing demand for HELOC products holds enormous potential for higher returns and thus warrants particular attention, according to a BenchMark white paper.

BenchMark research found that in home equity lending the two key drivers differentiating organizations-and determining success-are driven by technology convergence, in particular, processing speed and customer relationships.

"These drivers are really two sides of the same coin-as consumers become more and more educated about the lending process, they are demanding faster service," according to the BenchMark white paper. "Delivering on this requires lenders to embrace more automation as a way of closing loans faster and more economically."

"Mortgage lenders have provided a wealth of new products to meet the affordability requirements, cash flow needs, and risk tolerances of a range of borrowers," said Mortgage Bankers Association Chief Economist Doug Duncan. "This range of choices is a clear benefit to consumers. Mortgage borrowers are more educated about the lending process. Since they stay on average in their home only 5-7 years, many mortgage products are geared toward that stay."

Yaeger said customer demand, driven by the ability to research over the Internet, has in turn driven the process in HELOCs, much more so than the yet-unfulfilled widespread electronic mortgage.

"Consumers will go where it is easier," Yaeger said. "Cost is a second factor-lenders are driving down costs by going electronic. But technology is also a double-edged sword. "Lenders have to drive their costs down by being more competitive; one way to do that is to charge fewer fees."

But the efficiencies outweigh the drawbacks, Yaeger said. "There are interesting technologies that enable bankers to re-evaluate and monitor their practices over time, and respond more quickly to change. Technology allows lenders to spot trends that could have caught them off guard a few years ago. They can re-evaluate almost instantly and respond effectively."

And in the long run, the ease in providing quick and efficient HELOCs could drive the eMortgage process more quickly, Yaeger said. "I have great hope for an eMortgage. The industry is way overdue," she said. "I think HELOCs provide lenders with the opportunity to see how it can be done. Banks are comfortable with the model, and they continue to invent new products and take advantage of the technology."
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Acoustic Addresses HMDA Concerns
Murray, Michael

Acoustic Home Loans, Orange, Calif., a non-prime wholesale lender, had to meet company requirements through its loan origination software (LOS). One requirement was to enhance its interface for Home Mortgage Disclosure Act (HMDA) data and analysis.

"Because we were a new company [formed in 2003], we were not required to do any reporting so we did not have any software whatsoever to collect the data and use it for reporting," said Doug McMillen, programming manager at Acoustic Home Loans. "We did not have any method of automatically geocoding the subject properties. Each of those had to be done manually." McMillen, formerly with ProVantage Corp., North Canton, Ohio, used QuestSoft's compliance software and went to it again at Acoustic Home Loans.

Leonard Ryan, founder president of QuestSoft Corp., Laguna Hills, Calif., said there has been a greater sense of urgency in HMDA compliance over the past two years as bankers and mortgage lenders submitted data well before the March 1 deadline.

"The executives at mortgage companies are taking it much more seriously," Ryan said. "The data is the data. You need to have a story to back it up when someone takes a piece of it and picks it out."

Acoustic wrote the geocoder programs into its Contour software so that it could do geocoding without compromising the software, according to QuestSoft. Meanwhile, Acoustic uses one person working on a quarterly basis with HMDA data because of the new software. According to McMillen, the new interface allows Acoustic to instantly geocode properties rather than work on the task for 3 to 5 minutes.

"We estimate a 75 percent savings," McMillen said. "The last time we submitted [the report], it came back as 100 percent complete and error free. That, by itself, saves us untold hours of work. We do not have to go back through it over and over again [in post-closing]."

"That is our claim to fame," Ryan said of the QuestSoft's 90 percent automation and time savings sales pitch. "We had a 96 percent renewal on our software subscription last year. The ones that do not renew are either merging or their loan volume dropped off."

Jon Maddox, executive vice president of production and marketing at Acoustic, said the reporting is more accurate. "I believe it makes lenders more accountable for what they do," Maddox said. "I mean that on both sides of the ledger."

Maddox noted that while HMDA software holds lenders accountable to the process, it also determines borrower credibility as to loan qualifications. "This report goes through and verifies that we do not have high cost loans," McMillen said. "It is a very quick way of doing it so it helps us in other ways with compliance."

"The mortgage companies have the ability to take these allegations head-on. They are used to these compliance issues," Ryan said. "The new data simply made it easier to drill down. We added fair lending fields to our system and added more fair lending analysis so [lenders] can show the mainstream media that their data has integrity."

As a non-prime lender, Acoustic Home Loans uses its LOS to set business rules and parameters to guard against high cost loans from mortgage brokers. "Peers have said that we appear to be a technology company doing mortgages," McMillen said. "We are very much embracing the technology of the age. We want to do better decisioning and we are looking toward technology to help us make that decision." Brokers are able to check status and pipelines through Acoustic's origination system.

Acoustic Home Loans signed a contract with an undisclosed company to integrate a system into its LOS and submit data using XML. The system will calculate a "high cost loan" in different states based on the various state regulations. "We make sure it is definitely not high cost," McMillen said. "Every time a loan goes into another status, we will send it to the company to test it. We want to continually monitor it to ensure that we never go high cost." Acoustic said the system will roll out in early 2006.

(Mike Sorohan contributed to this article)

Wolters Kluwer Corporate & Financial Services, Amsterdam, The Netherlands, announced that it has acquired Entyre, a provider of Web-based compliance products to the mortgage lending industry. Entyre, located in Ann Arbor, Mich., provides loan closing document services to more than 350 mortgage lenders nationwide.

Entyre has 20 employees in its Ann Arbor office. Terms of the purchase agreement were not released. According to a statement, Entyre business will become a part of the Financial Services customer unit of Wolters Kluwer.

Wolters Kluwer has engaged in an aggressive expansion worldwide over the past five years. In 2000, Wolters Kluwer acquired VMP Mortgage Solutions, a provider of mortgage documentation and automation tools. In 2004, Wolters Kluwer acquired PCi Corp., Boston, a provider of lending products that integrate business intelligence built on its analytics, reporting and compliance-related data.

Entyre is best known for its eMortgage-X4 product, a data and document management and delivery software platform.

"The addition of Entyre to Wolters Kluwer's portfolio strengthens our position," said Christopher Cartwright, CEO of Wolters Kluwer Corporate & Financial Services.

Wolters Kluwer Corporate & Financial Services had revenues of €437 million ($529 million) in 2004 and employs more than 2,700.
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HUD-1 Check Connects Lenders to Closing
Murray, Michael
When Phil Huff, president and CEO of eLynx, Cincinnati, Ohio, listened to customers at the company's user client conference last year, he discovered an industry disgruntled with consistent mistakes at the closing table.

Borrowers found changes in fees, interest rates or spelling errors at the closing table, which delayed mortgage settlements. From minutes to hours or days, depending on the time of settlement, the errors could cause a borrower to lose a rate lock, pay more money than first expected or possibly be temporarily without a home.

"Some people in the room had horror stories," Huff said. "It came through loud and clear that they wanted us to fix that. "

At the time, eLynx was developing a product to facilitate HUD-1 transfers; but hearing from clients at once brought the case home. "To hear the collective say it, and for it to come out as one of the top three items that they wanted us to fix, those were marching orders," Huff said.

The result is HUD-1 Check, a product that passes a HUD-1 Settlement Sheet electronically between lenders and settlement agents through the e-Lynx Web Posting Service (WPS). Lender and settlement agents enter online.

As closing agents complete the final HUD-1 for signatures, they send it to the lender. The lender can view the status, review the HUD-1 electronically, automatically verify figures and "approve" or "reject" it based on the criteria. Comments can be added if necessary.

If rejected, the lender electronically sends the document back to the settlement agent for correction. The agent then resubmits it for approval. All of this action can be done in minutes using the Web-based approach through eLynxPRO. A lender or closing agent prints to a software printer making the HUD-1 available on the Web.

"Once it is on the Web, it can be viewed and reviewed by both parties taking part in the closing," Huff said. "It is customizable and users can create their own rules."

Huff said one industry analyst estimated that more than 60 percent of all HUD-1 Settlement forms contained errors. "That can have a tumbleweed effect," Huff said. "It can cost a lot of money in overhead just managing all that misinformation."
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Small Firms See Little Change in SOX Compliance
McAfee, Jamie
Companies expect the costs of implementing Sarbanes-Oxley Act Section 404 to decline by 7.4 percent this year. Smaller companies, as defined as having market caps less than $120 million, could expect no change in their costs, according to a survey by The NASDAQ Stock Market Inc., New York, and the American Electronics Association, Washington, D.C.

Executives from 298 companies responded to the survey, conducted in early August. It focused on the second year costs of implementing SOX 404 and streamlining its implementation.

The survey also found that auditors have improved their performance since SOX was first implemented. Companies said their auditors are qualified to complete the implementation of 404, in contrast to findings in an April survey when 30 percent of the respondents said the accounting industry had sufficiently trained staff to implement 404.

The costs of implementing 404 are serious for smaller companies. As a percent of revenue, smaller issuers in 2004 spent nearly 11 times more on SOX implementation compared to larger companies.

Additionally, the surveys found that 74 percent of the respondents said that the SOX legislation was necessary, but the concern was in the implementation of the legislation.

"The survey confirms what we have been hearing, particularly from the small- and medium-sized companies," said William Archey, president and CEO of AeA. "Auditors are treating these smaller companies as if they were multi-billion dollar businesses and imposing the same auditing requirements. AeA has argued that a 'one size fits all' approach to SOX 404 imposes unnecessary and costly burdens on smaller companies without improving investor confidence."
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Benefits of Compliance
McAfee, Jamie

Several companies from the credit-reporting sector completed the compliance certification process for the Mortgage Industry Standards Maintenance Organization's (MISMO) eXtensible Markup Language (XML) Compliance (MXCompliance).

MXCompliance allows for implementers of MISMO's XML standards to reference requirements and attempt to become officially compliant. One company that received compliance certification is Bixby Consulting Inc. Bixby Consulting, which hosts eHereNow.com, provides a Web service that validates MISMO SMART Docs, MISMO data files and translates mortgage data files from a company's internal data format to the data format of its trading partner.

"An example of one our customers is a subprime lender who wants to connect to 10 different credit vendors," said Mike Bixby, president of Bixby Consulting Inc. "A lot of credit vendors claimed to be MISMO compliant or support the MISMO standards. It became clear that there were different versions of MISMO that some credit vendors supported and others did not and then there was also varying degrees of how closely they supported the MISMO standards." Certain companies may not strictly adhere to the implementation guidelines regarding format, element order and other transaction requirements.

"What we provide as a Web service is the ability for a lender to be able to connect to multiple credit vendors," Bixby said. "But in the case of credit vendors, they can send us a single version and we can convert it into whatever format each particular credit vendor needs plus we make the communications connection with each credit vendor. When the credit data is returned, we take that credit report data in whatever MISMO format or other format that the credit reporting agency returns and convert it into a single MISMO format version that the lender needs."

The three types of MXCompliance services are Verification, Import and Export. Verification is a service for businesses interested in purchasing certified products and services that are certified as MISMO compliant. The verification allows the business to ensure that the product purchased has maintained the same level of compliance. Applicants seeking certification of their product or service interfaces against MISMO standards use the Import and Export services, such as Bixby's eHereNow.com

"Now having the MISMO-compliant stamp of approval, we're able to certify to the lender and show that we have followed the MISMO compliance program and are following the requirement that were laid down for the credit reporting standards," Bixby said. "We are also intending on doing that for other standards like mortgage insurance and the loan application as those become available. From our perspective, the compliance standard allowed an outside party and software to verify that we were doing what we said we were doing."

As companies struggle with the cost of compliance especially with so many reporting regulations like the Sarbanes-Oxley Act, how will companies react to another compliance standard? The cost of MXCompliance (currently ranging from $500.00 to $1,000.00) is based on the transaction being certified. While the cost of MXCompliance is relatively nominal, some companies may be required to modify existing software to be compliant, which can be costly. The immediate reality of that is that some older products may not be MISMO complaint.

"I have heard at the last Credit Report Workgroup meeting, there was one company that did express that they would have to go back and make changes to their 2.1 version to bring it into compliance and their reaction was that they had no intention on doing that," Bixby said. "They would bring future products into compliance but not existing products."

"My reaction to that was that the market might say otherwise to that," Bixby continued. "Lenders have been getting more and more vocal about wanting products that are compliant because it saves them a lot of time especially if they deal with multiple service providers in the same area."

"If a lender has a choice of say among five credit vendors and two of them are compliant, I think that shortly down the road they will choose the ones who are compliant because it will save them development time in being able to import that data into their system," Bixby contended. "I think initially there will be some reluctance but the market will force people to join the compliance and make sure they are producing a compliant product that is verifiable, which up till now there really hasn't been an independent organization like MxCompliance to do that.

According to Bixby, there are several advantages to the certification such as being included in the MXCompliance Registry. "Lenders for a long time have said that they would like to be able to go to a place on the MISMO Web site to, for example, be able to search for companies that have achieved compliance with the MISMO 2.1 credit response standard," Bixby said. "After a few more cycles or a quarter, when more people have become compliant and lenders find that the MXCompliance Web site is a reliable place to go to locate companies that are compliant, there will be more impetus for companies to join the compliance program."

For more information on MXCompliance, visit http://mxcompliance.mismo.org.
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Technology Briefs
McAfee, Jamie

Atlanta-based Advectis Inc. announced it is developing a BlitzDocs Connector with Flagstar Bank, Troy, Mich. The connector will allow BlitzDocs customers to deliver BlitzDocs electronic loan folders to Flagstar's imaging systems.

BlitzDocs Connector is a component of the BlitzDocs Collaboration Suite, featuring capture, submit, organize, underwrite, audit, share and archive of loan documents electronically using BlitzDocs' collaborative electronic loan folder, e-Folder.

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Commerce Velocity, Irvine, Calif., announced that Funding America, Houston, selected its CQ BrokerConnect and automated underwriting (AU) platform to provide brokers and borrowers with pricing, pre-qualification and full AU approvals.

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Portellus Inc., reached an agreement with The Pinnacle Companies LLC, McLean, Va., to streamline enterprise operations for Pinnacle's retail, wholesale and correspondent lending channels. The combination of Portellus' loan origination system (LOS), automated underwriting system (AUS), business-rules management system (BRMS) and various portal offerings will enhance the ability of Pinnacle's multiple business units to respond quickly to marketplace changes via one integrated solution, the company said.

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New homebuyers and owners researching online mortgage options benefit from free consumer reports, mortgage tools and services at http://www.newstarthomeloans.com/.

NewStartHomeLoans.com, using an online process, dedicates one professional mortgage consultant per client. Focusing on educating the consumer, they have also retained internet marketing firm Global VIP Traffic to successfully penetrate market segments searching for mortgage information prior to purchase. New Start Home Loans specializes in new home purchases and diverse mortgage refinance options; they also offer niche loan programs for borrowers unable to qualify due to low credit scores.

Update Your MBA Listing--Electronically
Murray, Venita

Members of the Mortgage Bankers Association can now use MBA's new Electronic Membership Directory. This electronic Directory is always current and, like the print version, contains detailed information regarding all MBA members.

Have you started using your MBA Membership Directory?  If you have, then you have experienced first-hand the value of the information now available at the stroke of a finger. If not, start today!  To receive your member access, please contact Venita Murray, senior membership specialist, at (202) 557-2845 (vmurray@mortgagebankers.org).

Please take a moment to review your company listing.  MBA updates the Directory monthly, and you can make changes to your listing at any time.

Updating your profile is easy.  Just visit http://mymba.mortgagebankers.org and enter the username and password that was provided in a recent email from Venita Murray.  At this site, primary contacts or a representative of your company can:

* Update company information;
* Register additional users to the Directory (all staff members can use one CD to load the Directory).
* Manage MBA subscriptions such as Mortgage Banking magazine, and more.

Changes made to corporate profiles are uploaded to the membership directory on a weekly basis.  Each month, users are prompted to update their directory.  Accepting this prompt will load all changes that have been made and will provide you with the most up-to-date details regarding not only your company, but all MBA members.  Keeping your company profile updated guarantees that the most current information is being displayed and accessed by your peers in the industry.

But, please don't stop there: share this valuable networking tool with all of your employees. Simply take a moment to register any and all staff members via http://mymba.mortgagebankers.org and pass your CD along to other staff members so that they too can download the Directory.
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