"There are a lot of examples of people who have developed great products, but they're four or five years ahead of times. There are electronic mortgage systems out there that can't be implemented yet. The capabilities are there and the companies the developed these products aren't around yet. You can't be first--but you should be a close second." --Bill Moody, CEO of Lenders First Choice.

Cipher Points Originators to Tax Returns
Murray, Michael

Non-traditional "no-doc" loans can allow loan originators to avoid the sometimes cumbersome task of figuring out a self-employed borrower's income at point-of-sale, but a tax-analysis software firm could give originators another option.

Cipher Data Resources Inc., Santa Ana, Calif., is a tax analysis software firm that provides originators with tools to determine a self-employed borrower's verifiable income based on two-year tax returns from the borrower.

"It's been our experience that 95 percent of us avoid tax returns," said Stephen Bristol, president of Cipher Data Resources and a former loan originator. "In the past we always got the tax returns and shoved them to our favorite underwriter and waited for days as to whether [the loan] was going to fly or not."

Bristol and founding partner Stephen Mosher have more than 50 years of mortgage broker experience combined and worked with forms to determine a borrower's actual income that Bristol said were not always accurate. According to Bristol, Cipher's objective is to provide the borrower with best pricing, which is usually a full-doc loan. By entering a borrower's 1040 tax return information into Cipher's software, an originator can determine a borrower's qualifications for the full-doc loan.

"To give that opportunity, there should be a program that is easy to use and [an originator] does not have to be a tax expert to use it," Bristol said.

Bristol noted that originators can miss cash flow opportunities on the 1040 form. Interest, potential dividends, royalty income and rental income, for example, can add more income to a borrower's application.

"You can have repetitive capital gains that are income producing and germane to the borrower," Bristol said. "There are a lot of different areas of income and if [originators] do not get the returns or ask for it, [lenders] will never know."

The main page of the Cipher 1 product (the 1 is shown as a footnote) includes actual income from the 1040 and an adjustment area for the underwriter to give a final adjustment of usable and recurring gain or loss. The second page consists of compensating factors and a compliance element or "underwriter review" section.

In April 2005, Cipher Data Resources added the 4506-T processing service to ensure that personal and business returns are the actual ones filed with the Internal Revenue Service. Bristol said the compliance section ensures that information on the tax return matches the borrower's mortgage application, including social security numbers, and that data on the tax return is also a match, such as schedule C and schedule K activity.

"It brings up subtle [items] for the underwriter's attention," Bristol said. "It is not a punitive program…it helps support the tax return. It shows inconsistencies in there."

Bristol and Mosher designed the system to meet Fannie Mae and Freddie Mac's standards by automatically populating Fannie Mae's 1084 Cash Flow Analysis form into the system. Freddie Mac reviewed the system as well. According to Cipher Data Resources, Freddie Mac "deemed it 'an acceptable tool to assist Seller/Servicers in meeting the requirements of Chapter 37 of Freddie Mac's Single-Family Seller/Servicer Guide for income analysis of self-employed borrowers.'"

Bristol said, however, that 95 percent of originators could have trouble completing the Fannie Mae form because they do not know where the numbers originate. At point-of-sale, it leaves the originator unsure of a final calculation on borrower income and becomes a waiting game for an underwriter determination.

"I happen to think the [1084 Cash Flow Analysis] format is pretty good. I think Cipher has taken it to a different level because we have several potential pages of reports. We separate the companies if [a borrower] has multiple companies. We separate the K-1 activity if there are several rental properties. We support it by separating and individualizing this income. Fannie's report doesn't do it," Bristol said.

Bristol believes the jumbo loan or the subprime loan would not have any other distinction or any other method for analyzing tax returns that Fannie Mae or Cipher have at this time. For Cipher Data Resources, the industry standard adjustments, such as appreciation and amortization, dollar losses at one time, are not actual dollar losses now and are "pretty normal and customary" for any level borrower.

"Subprime, jumbo loans--they don't change. A tax return is a tax return," Bristol said.
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Up to 80 Percent of eMail is Spam, Study Says
Sorohan, Mike
Unsolicited e-mails-commonly known as "spam"-continue to plague Europeans, accounting for between 50 and 80 percent of all messages sent to email inboxes, according to a report this week from the European Commission. And the report cites the United States as the single largest culprit.

The Commission called on regulatory authorities and stakeholders in Europe to "step up the fight" against spam, spyware and malicious software. Despite existing EU legislation outlawing spam in Europe, Europe continues to suffer from illegal online activities from inside the EU and from third countries, the Commission noted in the report.

"It is time to turn the repeated political concern about spam into concrete actions to fight spam," said Viviane Reding, commissioner for Information Society and Media.

According to the report, security firms Symantec and MessageLabs estimated that spam is between 54 percent and 85 percent of all email. In 2005, Ferris Research estimated spam to cost €39 billion ($51.4 billion) worldwide, while Computer Economics calculated malicious software to cost €11 billion ($14.5 billion) globally.

Citing figures from Sophos, an Internet security firm, the report said 32 percent of relayed spam came from Europe. Asia led relayed spam at 34 percent, but the U.S., at 21.6 percent of relayed spam, led individual countries, followed by China (13.4 percent), France (6.3 percent) and South Korea (6.3 percent).

The report noted that unsolicited email has become increasingly fraudulent and criminal. Criminals are luring users into revealing their sensitive data and finances via so-called "phishing" emails. Privacy is at risk because spyware, spread by email or software, tracks and reports on users' behavior. In turn concern about these risks is seriously restricting the growth of legitimate online services.

While cooperation exists within the European Union, implementation of anti-spam efforts has been sporadic. The Dutch have been most successful, with prosecutions under its watchdog group OPTA of spammers effectively reducing the amount of spam received by its citizens with just a €570,000 ($752,000) investment in staff and equipment.

"In line with EU legislation outlawing spam, the Dutch authorities have managed to cut domestic spam by 85 percent, Reding said. "I'd like to see other countries achieving similar results through more efficient enforcement."

The Commission plans to revisit the legislative framework next year by introducing legislative proposals to strengthen user privacy and security in 2007. The proposals would oblige service providers to notify security breaches that led to personal data loss and/or to interruptions of service supply. National regulatory authorities would have the power to ensure operators implement adequate security policies.
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Case Study: MeridianLink Technology Improves CU Member Acquisition, Lending
MBA Staff

WHO:
Beehive Credit Union, Salt Lake City, Utah
MerdianLink Inc., Costa Mesa, Calif., a provider of automated credit and lending technology

CHALLENGE:
Beehive Credit Union was looking for a way to boost new member acquisition and increase lending opportunities. Beehive Credit Union is a full-service, member-owned, non-profit financial institution. Founded in 1954, Beehive Credit Union has eight Utah locations, 22,000 members and assets of $180 million.

SOLUTION:
"We want[ed] Beehive to be easily accessible to non-members," said Tim Nguyen, senior vice president at MeridianLink.

Beehive selected MeridianLink's XpressAccounts product. Through the platform, credit unions gain an online process for customers to instantly acquire membership approval and simultaneously receive pre-approval offers for various loan products. New members are converted into lending customers using a combination of XpressAccounts and the LoansPQ lending platform.

RESULTS:
Beehive has seen a rapid increase in online applications that automatically generate new opportunities, according to Marv Armstrong, vice president of lending at Beehive.

"The results have been very rewarding. Our rates are attracting new members and the XpressAccounts platform is driving new business faster than we ever expected," Armstrong said. "LoansPQ and XpressAccounts have allowed this all to happen quickly and cost-effectively."

"It's the perfect marriage between member acquisition and product marketing that drives up higher lending volume," Nguyen said.

(Has your company solved a work challenge through technology? MBA Tech NewsLink accepts case studies that document challenges, steps taken to address those challenges and documented results. Submit inquiries to Mike Sorohan, editor, at msorohan@mortgagebankers.org. Case studies published in MBA Tech NewsLink do not connote endorsement of any particular product, technology or process and are presented for information purposes as a benefit to MBA members.)
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For 2007, Companies Must Reinvent Themselves, Study Says
MBA Staff
For 2007 and beyond, the global financial services industry will increasingly grapple with three major strategic shifts: reinventing financial services at its core; repurposing financial services relative to the global diversity of a changing customer base; and helping restore confidence in an uncertain world, according to a report from TowerGroup, Needham, Mass. 

The reports examine the top business drivers, strategic responses and technology priorities that will fuel core sectors of the global financial service industry in 2007.

"The global financial services industry is changing in response to tectonic shifts in marketplace and business dynamics," said Guillermo Kopp, vice president of TowerGroup cross-industry research. "Traditional markets are saturated with product and service options. The maturation of established customer segments is limiting traditional market opportunity. Both customer satisfaction and loyalty are being eroded by competition from traditional and nontraditional sources and industries."

TowerGroup said fundamental innovation-based on real-time transactions, interconnected services, advanced customer analytics and business intelligence-are critical for financial services institutions.

"Understanding core business drivers, strategic responses, and technology initiatives for 2007 and beyond will help financial services executives embark on the dialogue regarding innovation that each institution must have relative to its future," Kopp said.

Specifically, the reports found that:

· Reinventing Financial Services: The financial services industry has been slow to reinvent itself in the face of an increasingly networked world. "Without reinvention, institutions risk being disintermediated by nontraditional industries as new, previously unlikely competitors find their way into financial services," TowerGroup said. "Rather than continuing to make tactical changes in response to shifts in the marketplace, successful firms will be those that consider how to reinvent the financial services institution from a blank slate-rethinking the full spectrum of products, services, and delivery options."
 
· Repurposing Financial Services for Global Diversity: Financial institutions must begin responding more effectively to dramatic changes in a continuously shrinking world. "Emerging economies will demand a broader range of product and service options to meet wider variations in customer needs and economic status, the reports said. "It is no longer acceptable to operate under a business model focused purely on shareholder value-meaning institutions must develop dynamic capabilities for serving a larger number of more varied and yet more modest customer relationships in a profitable way. Success will mean establishing a lifetime relationship with large numbers of people who were previously outside the normal scope of an institution's services."

· Restoring Confidence in an Uncertain World: News of security breaches, loss of customer data, identity theft, fraud, and terrorism has been disturbing to individual financial institutions and the industry as a whole. Meanwhile, none of the industry's traditional risks (such as those related to credit, catastrophes, investments or interest rates) have dissipated. "To date, most institutions have pursued the single strategy of playing defense against the universe of global threats," the report noted. "Yet institutions have an obligation to take greater control by making an offensive foray into the global need for assurance, responsibility, and security."

"Senior financial services leaders must rethink the business drivers of their firms in terms of global trends and emerging risks, while redefining markets along new and innovative lines," said Rodney Nelsestuen, senior analyst in the TowerGroup Financial Strategies & IT Investments practice and author of the report. "These visionary shifts in strategy will ultimately result in better stakeholder value, as delivered through improved profits and more effective internal processes."
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The Dawn of Wall Street Influence on the Mortgage Industry
Dangelo, Mark
(Mark Dangelo is vice president of mortgage services with Alsbridge, Dallas, and a regular contributor to MBA Tech NewsLink. He can be reached at mark@mpdangelo.com. His books, articles and podcasts can be found at www.innovative-relevance.com.) 

It was early 2005 when an article brought up the prospects of potential "Giants in the Canyons" discussing new industry entrants, their impact on back-office operations and a fresh perspective for the digital integration of a fragmented origination and servicing industry. As 2006 enters its twilight, it appears that indeed those non-traditional market influencers and partners have now come to be competitors. 

Fueled by an increasing demand for quality MBS (mortgage backed securities), Wall Street firms using their private label products now account for nearly 30 percent of all outstanding MBS (per the FDIC, securitization in 2005 comprised 68 percent of all residential mortgages).  Investor demands for increased yield MBS has materially contributed to a number of highly visible mortgage M&A events in 2006 -contributing to a record worldwide global M&A activity that exceeds $3.3 trillion for all industries.

Recognizing the returns and efficiencies that can be gained by increasing vertical channel capabilities, Wall Street is broadening its impact on market makers and delivery organizations with an accelerated embracing of e-Mortgage processing. Analogous to STP (straight-through processing) and T+3/T+1 (trade plus settlement days), investment and international banking operations recognize the bottom line returns that can be achieved using best-of-breed processes, highly automated exchanges, globalized workforces and information standards. 

Armed with lessons learned, M&A integration models and aggressive performance targets, these recently purchased mortgage operating environments may represent the "catalyst for innovation" necessary to break the old paper-based and document scanned back-office operations. After all, Wall Street is no stranger to change, risk, controversy and adaptation.

Whereas these new challengers' present unknown risks for established mortgage firms, opportunities exist for those willing to quickly assimilate their transformational and experiential lessons learned. Even though the mortgage industry has been dominated by stove-piped internal operations and serialized processes, the entry of these formidable competitors provides the industry with some discrete actions:

· Innovation of the Back-End Value Chain to radically reduce the time-consuming serialized processes, information reentry, and integrated information systems.

· Reducing Settlement Time using e-Mortgage standards to accelerate post-closing to days from the current weeks and months thereby improving MBS availability and reducing outstanding lines of credit.

· Incorporating Regulatory Compliance and Reporting into a by-product of the delivery chain from origination through MBS avoiding "one-off" efforts that add time, inefficiencies and increase risks (e.g., error processing, exception handling and inaccuracies).

· Use of Industry Standards from the lessons of the bond and equity markets, increased implementation of MISMO, PRIA and ALTA standards to promote system interoperability, securitization and cost reduction.

· Custom Tailored Customer Service will be the norm expanding farther down into the middle market customer base and well beyond just the "affluent" borrower. It will not just be about automated call centers and VoIP implementations, but a truly customizable experience that "locks-in" customer continuance for an industry that is now viewed a commodity.

· Technology Must be Part of a Holistic Solution able to bring about compartmentalized changes to facilitate organizational change, continuous improvements and incremental gains.

The market is set for a radical disintermediation. As the current acquisitions by the Wall Street firms have been concentrated primarily around the non-prime niche, one should expect major announcements in 2007 and 2008 in the prime segment as these pioneer players expand their product line and seek new investment opportunities.

After all, while the M&A activity within the mortgage industry has been limited and buyers seek improved deals, the projected Wall Street acquirers have built highly efficient and profitable organizations on finding, leveraging and integrating diverse financial products into a comprehensive customer portfolio. It's just a question of who is the next acquisition and how the mortgage industry will respond to the changes?

(The views expressed do not necessarily reflect the views or policies of the Mortgage Bankers Association. MBA NewsLink welcomes your contributions. Articles and inquiries should be submitted to Mike Sorohan, editor, at msorohan@mortgagebankers.org.)
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MISMO Balloting Begins
Morrison, Carrie

The ballot for the MISMO Governance Committee is now open. Voting will take place through January 5th, 2007. The voting representatives of each subscriber company are allowed to submit one ballot.

The following are the candidates for election:

Government Sponsored Enterprise (GSE)
Shannon Lloyd - Fannie Mae (Incumbent)

Technology Vendor (one seat)
Mike Bixby - eHereNow / Bixby Consulting, Inc.
Roger Gudobba - Wolters Kluwer Financial Services (Incumbent)

Residential Origination Technology Company (one seat)
Chris Anderson - Gallagher Financial Systems, Inc. (Incumbent)
Michael Detwiler - Mortgage Cadence

Residential Lender/Mortgage Broker (two seats)
Brian Boike - Flagstar Bank
Igor Derensteyn - Countrywide Financial Corporation
Dave Erkes - GMAC Rescap (Incumbent)
Patrick Hartford, CMT - Quicken Loans
Michael Levine - Wells Fargo Home Mortgage (Incumbent)
Sanjay Mandloi - JPMorganChase

Residential Service Provider (one seat)
Dan McLaughlin - MERS
Kelly Romeo - American Land Title Association (ALTA) (Incumbent)

Residential Mortgage Insurance Company (one seat)
Nancee B. Gorenstein, CMB - Mortgage Guaranty Insurance Corporation (MGIC) (Incumbent)

Residential Servicing Technology Company (one seat)
Ron Duff - Fiserv (Incumbent)

Commercial Primary Market Participant
Wendy Sadeh - Bridger Commercial Funding (Incumbent)

Commercial Vendor/ Third Party Provider
James P. Cooke - Ballard Spahr Andrews & Ingersoll, LLP (Incumbent)

Please contact nominations@mismo.org with any questions. To view the candidates' biographies, go to http://www.mismo.org/voting/bios.aspx?id=130.
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MISMO Trimester Workgroup Meeting Jan. 22-26
MBA Staff
The next MISMO Trimester Workgroup Meeting will take place January 22-26, 2007 at the Renaissance Long Beach Hotel in Long Beach, Calif.

To register for the meeting, please go to the MISMO Online Store, http://store.mortgagebankers.org/shome.aspx?SKIN=MX, and click on MISMO January 2007 Trimester Meeting under Upcoming Events. On the following page, please click Register. If you have registered for MBA events before, you will need to enter your username (a seven digit number) and password previously provided to you. If you are a new online store user, you will have to set-up an account to register.

After logging in and selecting the meetings you would like to attend, please press Finish at the bottom of the page. The next page will list the meetings you are registering for and will give you the opportunity to make any updates to your selection. After verifying your choices, please checkout. You will once again be asked to confirm your order and you MUST press SUBMIT at the bottom of the page to complete the registration process. If you do not finish this last step your registration will not be captured. After your registration is complete, you will then receive a confirmation e-mail. Please verify that all information is correct, specifically noting your badge information.

For onsite registration, download the walk-in registration form a www.mismo.org/files/mismo/LongBeachRegistrationForm.pdf. Complete the form and bring it to the registration desk at the hotel.

MISMO Non-Subscriber Meeting Fee
There is a $395 per person meeting fee for MISMO non-subscribers. You may pay this fee online with a credit card when you register. You may also consider becoming a MISMO subscriber. By joining MISMO, your organization is entitled to full subscriber benefits, including free registration for all MISMO trimester meetings. To join MISMO, please download our subscription form at http://www.mismo.org/files/mismo/MISMOSubscriberApplication.pdf.

Meeting Facility
Renaissance Long Beach Hotel (http://marriott.com/property/propertypage/lgbrn)
111 East Ocean Bouvelard
Long Beach, California 90802
Telephone: (562) 437-5900
Fax: (562) 499-2509

Room Rate
Single and Double Occupancy $159.00/night
To make your hotel reservations over the phone, please call (800) HOTELS-1. Please be sure to identify that you are with the Mortgage Bankers Association/MISMO event. The event code is mbambaa.

To make hotel reservations online, go to http://marriott.com/property/propertypage/lgbrn?groupCode=mbambaa&app=resvlink.

If you are planning on staying at the hotel on the Friday and/or Saturday before or after the meeting, please call to make reservations as opposed to booking them online.
 
The room block expires January 5, 2007 so please make your reservations before then. The room block will NOT be extended after January 5, 2007 and rooms will be offered based on availability. Reservations must be cancelled by 4:00 p.m. of scheduled arrival day to avoid a one night's stay penalty. Please note, meeting registration does not reserve hotel accomodations (and vice versa).

Hotel Amenities
The Renaissance is located near the heart of the Long Beach entertainment district and just steps away from trendy dining, nightlife and boutique shopping. The hotel offers a heated pool, whirlpool and a fitness center. A biking trail, kayaking, sailing, scuba diving, snorkeling, tennis and volleyball are all within close proximity to the hotel. There is an Italian restaurant and a lounge on-site. The Bixby Village Golf Course is also nearby.

Nearby Attractions
Go to http://www.tripadvisor.com/Attractions-g32648-Activities-Long_Beach_California.html for local attractions.

Parking
Self-parking is $12/day and valet parking is $16/day.

Airport Transportation
The Renaissance is located 11 miles (15 minutes) from the Long Beach Airport and 22 miles (30 minutes) from LAX.

If you have any questions regarding this meeting, please contact Carrie Morrison at cmorrison@mortgagebankers.org or (202) 557-2797.


Daily Schedule:
www.mismo.org/files/mismo/MISMOJanuary2007DailySchedule.pdf

Grid View:
www.mismo.org/files/mismo/MISMOJanuary2007ScheduleGridView.pdf
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Tech Briefs
MBA Staff

Advectis, Hanover Capital Collaborate
Advectis Inc., Atlanta, provider of electronic mortgage document collaboration services, announced that New Jersey-based Hanover Capital Partners selected BlitzDocs Collaboration Suite as its corporate document imaging for providing due diligence and quality control (QC) services for investor customers.

Hanover Capital Partners has also become a BlitzDocs Certified QC Provider and BlitzDocs Certified Due Diligence Provider.

PushMX Expands R&D Efforts
PushMX Software, Santa Clara, Calif., a productivity services provider that has developed automated workflow applications, increased its research and development (R&D) department by 60 percent.

The R & D team includes engineers in the technology arena.
 
Lending Solutions, RelyData Offer Free Credit Report Management
Lending Solutions Inc., Elgin, Ill., a provider of lending center services and consulting programs for financial institutions, through its partnership with Chicago-based RelyData, a provider of identity theft restoration services, announces a credit monitoring alert system for accountholders at credit unions, banks and other financial services providers.

RelyData's Credit Report Alert Notification E-mail, or CRANE system, is a free alternative to expensive credit monitoring for consumers who want to monitor the status of their credit reports more vigilantly.

DelMar Database Launches DocumentTrac Standalone
Del Mar Database, San Diego, a business unit of Fiserv Inc., launched DocumentTrac Standalone, an electronic document management (EDM) service that provides lenders with imaging, filing, retrieval and distribution of all documents associated with a loan file.

DocumentTrac Standalone can be integrated with a lender's existing mortgage banking system to increase overall efficiency and profitability. It is designed for small and medium-sized lenders.

Visionet Systems Launches Campaign Management/Customer Retention Platform
Visionet Systems, Cranbury, N.J., launched VisiRetention, a platform providing campaign management and customer retention systems that reduce risk and streamline workflow for mortgage bankers.

VisiRetention creates an approach to campaign development through alignment of departments within the mortgage company, allowing lenders to retain their portfolios while increasing income through identification of high-risk refinance loans and providing a process to portfolio borrowers.

Impac Partners With Ellie Mae on Special Loan Incentives
Impac Lending Group, Newport Beach, Calif., a subsidiary of mortgage REIT Impac Mortgage Holdings Inc., and Ellie Mae, Dublin, Calif., a provider of software and services to the mortgage industry, announced a partnership to offer special incentives on loans made through Ellie Mae's Encompass mortgage loan origination system.

Impac will offer participating brokers a 25 basis point reduction on Impac's 5/25 Option Adjustable Rate Mortgage (ARM) product when they originate loans through the Encompass system. Brokers who use ImpacExpress, Impac's automated underwriting and pricing engine, will receive higher commissions, improved service to borrowers, faster loan processing and access to loan incentives.
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MBA Tech NewsLink Reprints Available
MBA Staff
Articles appearing in MBA Tech NewsLink are available as reprints for a nominal fee. Reprints are done on quality paper or can be sent electronically as a .PDF file. Reprints can be distributed to your employees, to illustrate presentations or for other communication purposes.

For reprint information on stories in MBA Tech NewsLink, contact Bob Thornton at (800) 394-5157, ext. 28.
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2007 Technology Outlook
Sorohan, Mike

MBA Tech NewsLink recently sat down with four leading mortgage technology experts to discuss the technology outlook for 2007. Part I appears below.

Participants included:

Rob Lee, CEO of XSell LLC, Jacksonville, Fla., a provider of multi-channel platforms designed to help lenders identify sales opportunities through call centers, Web sites and interactive voice response units.

Tony Chao, chief operating officer with Allied Mortgage & Financial Corp., Sunrise, Fla., a collateral-based lender specializing in hard money lending for the commercial, correspondent and residential sectors.

Bill Moody, president of Lenders First Choice, Simi Valley, Calif., which provides settlement services and title insurance to national and regional lenders.

Eric Gorrell, president and CEO of HomeTeam, Seattle, which targets first-time homebuyers through a consumer Web portal, a syndicated television show (Cause TV) hosted by Troy McClain ("The Apprentice") now in its second season and an education service, Home Team University.

MBA TECH NEWSLINK: So, this being a 2007 outlook discussion, what is your outlook for 2007?

ROB LEE: What we're focused on is cross sell and retention solutions. In terms of retention, the ARM reset is one of the hottest topics for our clients. At the end of 2006 and going into 2007, you're seeing a lot of resets taking place, and it's a tremendous challenge given the portfolio makeup. It's a bigger challenge for some than others. So irrespective of whether rates drop, there will be a retention challenge in the industry, and that's what we're focused on.

TONY CHAO: Our forecasters were developing a correspondent program that we want to take on the national level, all states, and a commercial product. The biggest product focus has been licensing. We have a bankruptcy products and a foreclosure products that we're eager to get out, given the resets. But going into other states, every state seems to have different requirements. That's the biggest challenge for us.

BILL MOODY: Our challenges are a little different. We don't know where interest rates will go. But what we're seeing from lenders is cost reduction-not necessarily offshoring, but outsourcing. When you fully automate part of your service, that turns a fixed cost into a variable costs. We're seeing a lot of that to the point where we have a new division talking about it.

ERIC GORRELL: We're out dealing. We want people using our service for retention, and that's an advantage to us. What I see, as a lead generation company, I see the need and the concern is keeping key loan officers. But from home teams perspective we see an opportunity to provide qualified leads and retaining lenders to keep them on the payroll. They want to keep their good guys. We've been meeting with customers coast to coast. Every one of them wants to keep and retain their key loan officers. They don't mind losing the ones who came into this as a part time job.

MBA TECH NEWSLINK: Are the patchwork of state and local laws and ordinances governing lending practices burdensome for you? Would a uniform, national standard for lending practices be more advantageous?

CHAO: I think that would be a tremendous advantage, particularly for small-to-midsized lenders. It would level the playing field and bring more products to consumers. Right now, unless you have the finances, even if you have a decent product…the segment that gets hurt the most from private lending and non-institutions lending is the lending side.

Most states don't regulate commercial lending, and there's less compliance and risk. Here in Florida there is tons of money competing for the same business, where if you go into other states, there are only a few players and rates seem to be higher and fees seem to be higher. In Texas I get three different answers from three different sources.

LEE: One of the things that our platform does is allow lenders deliver alternate options. Many of our clients and prospects, before using our platform, had only offered optional products using direct mail. With so many options in different states, governing how things can be offered is a challenge…If you're a Countrywide, you can managed that process, but if you're a smaller player trying to et a bigger footprint, it's a challenge.

MOODY: We do have a national economy-in fact we have a world economy. It's harder for the small-to-medium lenders to comply with certain state regulations. It's been talked about for years. Some standardization of lending principles on a national scale would not only be better for lenders, but for consumers as well. Standardizing the lending platform would sure help consumers understand, and help the lenders understand what's going on. There are some obscure standards that lenders have problems with.

Standardization would require vendors to cooperate a little more. I'm not sure that would happen. We're closing transactions in 44 states, and sometimes it's county by county. The consumer needs to be protected, but more standardization would help us, because we help the lenders become more compliant. Most of the people in the title industry would be happy to discuss standardization.

MBA TECH NEWSLINK: In your company's planning and forecasting, how far ahead do you look ahead? Is it practical in this environment to look ahead beyond six months?

CHAO: We fund and portfolio 80 percent of what we originate, so we're looking far ahead-much further than six months. From a funding perspective we're always looking two years ahead. And it's difficult, with rates rising, things take time to implement. Now we're looking at least a year in advance in terms of timing issues. And licensing is something that we have to plan ahead for. We're having discussions about J where we want to be for 2008.

MOODY: We're looking both ways. In the title business, in the long term it's where we need to be to attract new clients, but in the short term it's what do we do this month. In our non-traditional products like post-closing and ad-tracking, we have to look long term because there's a lot of footwork and technology because you have to anticipate.

MBA TECH NEWSLINK: How does the risk of obsolescence affect your business?

MOODY: If we don't develop new products now, we risk being out of business two or three years from now. In two or three years, there is going to be a lot more automation and a lot less documentation. If you don't develop software quickly, and you don't get it to the market fast, you risk obsolescence, so you have to develop it as fast as you can.

There are a lot of examples of people who have developed great products, but they're four or five years ahead of times. There are electronic mortgage systems out there that can't be implemented yet. The capabilities are there and the companies the developed these products aren't around yet. You can't be first-but you should be a close second.

CHAO: We have to be constantly adopting and changing. Previously, with the spreads on correspondent loans, we were retaining more and selling less. And other correspondent lenders were selling all their loans. Now, we're seeing tightening guidelines, so we've shifted to more pass-through type products. That's why we're expanding to other states. You have to do it quickly. By the time you roll a product out, the market's changed.

MBA TECH NEWSLINK: Do you see some reluctance from clients to try new products or services, for fear that the product will become obsolete?

LEE: From a technology perspective, our clients are generally from one or two camps: some are embedded in their culture that they want to lead the market and in fact deliver new products that aren't necessarily tested. They'll try a lot of things on a small scale and adapt them and replicate what works. That client tends to be a great customer for us.

On the other side is that there are clients that really won't do anything until it's been tested ant proven multiple times, with real staying power. These clients really don't move from one way or another.

CHAO. Because of the clients that we have, our clients are other lenders or mortgage brokers or commercial borrowers. We had a condo conversion product, and now that everyone is concerned with condos, our product was geared toward affordable housing. We developed products because a customer requested it, so it becomes a niche product with greater applicability.

BORRELL: I echo what Rob says. We find there are two camps out here. There are some who are looking for cutting edge-they tend to be the most entrepreneurial. Then there are others who say, when you have 'so-and-so' on board, come back to us.

We're an entrepreneurial industry. We have to be innovative. With the industry at the county level, you have to be flexible. Only a handful of counties accept eSignatures. We, being a provider of both mortgages and real estate, have to look to the most aggressive of players without a lot of backflow. We've had no problem getting players.

MOODY: We see it too. One of the issues we've always had with new products is that the large players say they want to be more creative, but they can't because of their size. And the small players have to see immediate results, or they can't sustain themselves. Eventually, if something takes off, the large guys will adopt the product. Small nic