Digital Signature or Encryption Key: An asymmetric encryption transformation used to approve or sign an electronic record or detect alteration of an electronic record.

“When it comes to eCommerce, the industry is partying like it’s 1999. We've seen focus on Web content come and go and come again, and now, multi-channel is the new old buzzword.” --Tamara Mendelsohn, senior analyst at Forrester Research.

Mortgage Fraud Up 30 Percent, MBA/MARI Report Says
Mechem, John
Reports of mortgage fraud in 2006 rose by 30 percent over 2005 levels, according to new research announced by the Mortgage Bankers Association and the Mortgage Asset Research Institute LLC.

MARI, a ChoicePoint Service, delivered its Ninth Periodic Mortgage Fraud Case Report to MBA this week. The report examines the current state of residential mortgage fraud and misrepresentation in the United States based on participating lenders' reports to MARI.

"Fraud against mortgage lenders is a growing concern to all who have a stake in our industry," said MBA Chairman John Robbins, CMB. "While we continue to try to get our arms around the full scope of the problem, the MARI report significantly helps the industry better understand where we need to focus efforts in defending our companies and communities against mortgage fraud as it increases in frequency across the nation."

MBA has been a leader in raising the national profile of mortgage fraud against lenders and bringing together all those who are affected by fraud to help find solutions. MBA is leading an effort to obtain an additional $6.25 million annually for the FBI to hire additional investigators and prosecutors solely responsible for dealing with cases of fraud against lenders. In addition, in March, MBA signed an agreement with the FBI to promote the use of the FBI's Mortgage Fraud Warning Notice.

Highlights in the report include the following:

· The number of reports in MARI's Mortgage Data Industry Exchange (MIDEX) database pertaining to 2006 originations is 30 percent higher than the number of reports in the 2005 book of business at the same time last year. Additionally, incidents of mortgage fraud are now more evenly distributed across nearly all states whereas, in prior years, reports tended to be concentrated in relatively few states.

· Changes have occurred in the rankings of states in terms of their mortgage fraud experience, with Florida taking over the top spot and Georgia showing the greatest improvement from prior years' rankings.

· The most common types of fraud found to date in 2006 originations are in the areas of employment history and claimed income.

· California's reported fraud had been quite low in the past few years, and some industry experts have suggested that its problems were masked by high real estate appreciation. The recent slowdown in its housing market may explain California's return to high ranking in this year's report.

"Collaboration is the key for the mortgage industry as it continues its efforts to fight mortgage fraud against lenders," said Merle Sharick, vice president and national manager of business development for MARI. "MARI is pleased to be part of this effort by disseminating current data to MBA members through our annual fraud report."

MARI provides MBA members the annual reports as well as discounted fees to participate in MARI's MIDEX database. The MIDEX system allows mortgage lenders, insurers and agencies to exchange information about companies and professionals that have been involved in loan transactions containing alleged fraud or material misrepresentations.

MARI also offers the Mortgage Fraud Alert System (MFAS). This system issues periodic alerts to subscribers about suspicious activities related to mortgage lending.

A full copy of the report is available on both MBA's web site, www.mortgagebankers.org and on MARI's web site, http://www.mari-inc.com/reports.html.
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An Offshore 'Katalyst' for Mid-Tier Lenders
Murray, Michael
Mid-tier and smaller lenders could offshore to India and find the same cost savings benefits as larger lenders, according to Capsilon, a San Diego-based business process outsourcing (BPO) firm.

With an operation in Pune, India, Capsilon’s strategy targets mid-tier and smaller lenders interested in outsourcing to India and eliminating costs of negotiations with third parties on leases, human resources and equipment while reducing barriers with foreign cultures.

Capsilon's Loan Katalyst product images and upload mortgage documents—identifies, classifies and collates them from a secure FTP site—and provides them in proper order to lenders through an electronic loan file to a secure Internet site. It provides front-end loan processes and post-closing functions, including exception processing; data entry and verification; quality control and assurance; and loan audits. Lenders and service providers can view the loan files and act on them from any location using the Internet.

“We think it is a perfect alternative to allow the mid-market and smaller companies to compete,” said Jim Hennessy, managing director at Capsilon.

A report this month by Deloitte Consulting LLP, New York, forecast nearly all mortgage lenders offshoring at least some business processes within the next three to five years, and the report said lenders could reduce 35 percent to 45 percent in processing costs through offshoring. Hennessy estimated that percentage as higher.

“Every dollar [smaller mortgage firms] save in the process—that 35 percent to 45 percent, goes right to the bottom line,” Hennessy said.

The mortgage-processing BPO market in India in 2005 was nearly $150 million with estimates of the banking BPO market to grow to nearly $1.1 billion in five years, according to a white paper from Avendus, Bangalore, India, and Trinity Business Process Management, a Gurgaon (New Delhi)-based subsidiary of Trinity Partners, Tucson, Ariz.

“It’s much more now [than $150 million],” said Greg Bowcott, COO at Capsilon, of the mortgage-processing BPO market in India. “It’s almost a feeding frenzy over there.”

An online publication of India outsourcing, Outsourcing Times, reported that India’s BPO sector could maintain current export momentum and grow by 35 percent to 40 percent in the 2006-to-2007 fiscal year and achieve $8 billion to $8.5 billion —compared to $6.3 billion in the previous fiscal year. Industry reports estimated the BPO sector to reach $25 billion by 2010.

Meanwhile, in November, 2005, WNS Global Services, a BPO based in Pune, acquired Trinity Partners, giving WNS Global a presence in the mortgage industry. Prior to that time, Calabasas, Calif.-based Countrywide Financial, Pasadena, Calif.-based IndyMac Bank, CitiMortgage, St. Louis, and Greenpoint Mortgage, Novato, Calif. were “successfully leveraging India-based delivery centers” to reduce margin pressures, according to the Avendus-Trinity white paper.

“It’s obvious a mega-lender is going to be there with its own people,” Hennessy said.

In October 2006, Wells Fargo & Co., Des Moines, and WNS Global Services agreed to provide Wells Fargo correspondent lenders with the ability to use the WNS digital loan management (DLM) platform to its correspondent lenders. The automated platform provided loan document indexing, data extraction, loan delivery and quality assurance tasks, and the data was formatted to Wells Fargo specifications.

Hennessy said BPOs for larger firms are more likely to include a financial commitment of a certain number of full-time-equivalent employees (FTEs), which guarantees that the BPO provider uses the FTEs. He added that small to mid-tier lenders could translate fixed costs to variable ones with an “on-demand” approach—charging by the loan—without a large up-front commitment using Loan Katalyst. 

“Our [companies] do not have to allocate 100 seats for a given lender,” Hennessy said. “The fixed cost is quite a big pick up, but they are exchanging one cost-basis that is fixed with another cost-basis that is fixed. The smaller [lender] does not necessarily want to get in and try something with that kind of commitment.”

“The rest of the market can take advantage of the same economies of scale as the very largest lenders,” Bowcott said.

The smaller onshorers were the firms that faced "the toughest challenges in the future,” and needed to counteract narrowing profit margins, according to a November 2005 Deloitte Research report,Global Financial Services Offshoring: Scaling the Heights.

“Lacking scope and scale, smaller players continually look at a variety of strategic options. Perhaps highest on this list should be the consideration of using shared service back offices to gain economies of scale,” the Deloitte Research report said. “These smaller firms may be able to sidestep the trend—at least temporarily—but will eventually be forced to address the growing cost gap.”

Bowcott said the same is still true today, particularly with large firms getting larger through industry consolidation as well as current subprime sector concerns and “very thin” margins for traditional and conforming players as well.

“I think the very small players—represented by very small lenders and brokers—will not be affected because they are very nimble and quick,” Bowcott said. “The companies threatened are the ones in the middle—the mid-tier firms—and they have to get more lean and efficient to compete with the big [players], especially in times like this with the subprime sector still in trouble.”
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Consumers Drive Multi-channel eCommerce
Murray, Michael
Multi-channel eCommerce is on the rise, with consumers the key difference, according to Cambridge, Mass.-based Forrester Research.

“When it comes to eCommerce, the industry is partying like it’s 1999,” said Tamara Mendelsohn, senior analyst at Forrester. “We've seen focus on Web content come and go and come again, and now, multi-channel is the new old buzzword.”

The eCommerce market grew by 25 percent and topped $220 billion last year, the research firm said, giving a more positive outlook for the future of online purchases. This year, more than $500 billion of in-store sales will be influenced by the Internet, representing more than 16 percent of total retail sales by year-end, Mendelsohn said.

Mendelsohn noted that multi-channel shoppers—consumers who research products online and buy offline—are the focal point again for the increase, but consumer attitudes are the key difference.

“Multi-channel discussions of years past could afford to be philosophical because mainstream consumers weren't shopping across channels, but a series of high-profile maneuvers by retailers such as The Limited Brands and Borders highlight the fact that the multi-channel consumer has arrived—in droves,” Mendelsohn said.

According to Forrester, 75 percent of online consumers have purchased a product online, and more than 50 percent of consumers research products online and purchase them in the store. Overall growth of cross-channel sales is strong at 17 percent compound annual growth rate (CAGR) in the next five years, outpacing retail and eCommerce, which is positioned to grow 13 percent CAGR. Cross-channel sales will grow from $389 billion in 2006 to $1.1 trillion by 2012, accounting for 38 percent of total retail sales.

Meanwhile, nearly 45 percent of consumers end up buying from a different retailer than the one that they researched online because of price—a statistic that highlights the importance for cross-channel coordination and strategy, Mendelsohn said.

“Researching online and buying in the store is driven primarily by immediacy—after taking the time to research and make sure that they choose the right product, cross-channel consumers just can't wait for shipping, and the Web still struggles to compete with instant gratification,” Mendelsohn said.
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Hispanics Prefer Spanish-Language Web Sites
Murray, Michael
More than half—51 percent—of Hispanics using the Internet in the United States prefer Spanish-language Web sites, and 23 percent must have Spanish online, according to the Hispanic Consumer Technographics report from Forrester Research, Cambridge, Mass.

Nearly 50 percent of Hispanic adults—13.9 million people—are online at least monthly, up from 45 percent last year, and more than 60 percent of online Hispanics have broadband at home, compared to 40 percent in 2005.

"English-language sites are currently under-serving 7.1 million online Hispanics," said Tamara Barber, data researcher at Forrester. "If companies are serious about reaching this growing audience, they need to offer Spanish-language sites. Not only does Spanish online help those who depend on Spanish for interactions, but it also builds brand value with consumers who can transact in English but prefer to be served in Spanish."

The phone survey of 3,000 U.S. Hispanic adults conducted by Forrester in the first quarter found that more than half of online Hispanics fit into one of these four criteria, and 23 percent of them fit into three or four of them. Forrester's data shows that Bank of America serves 1.3 million Hispanics who prefer Spanish online.

While 32 percent of online Hispanics are more comfortable visiting Web sites that are in Spanish, nearly 30 percent of Spanish-preferring Hispanics get more of the information they need when using a Spanish-language Web site.

Nearly 30 percent of Spanish-preferring Hispanics say they are more likely to trust companies that have Spanish-language Web sites, and more than 25 percent of Spanish-preferring Hispanics spend at least half of their Internet time in a Spanish-language site.

The increase in Spanish language users—and Hispanics who prefer Spanish-language Websites—has not been lost on the Mortgage Bankers Association. Its educational Home Loan Learning Center web site (www.homeloanlearningcenter.com) currently has a Spanish-language version, and it will be updated with a new Spanish-language version within the next few weeks.

Forrester defines Spanish-preferring consumers as Hispanic online consumers who would have a more positive customer experience in Spanish.
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Information Security Awareness
Schlecht, Robert
(Robert Schlect is director of industry technology, security and compliance with SISAC, a division of MISMO.)

Information is power. For years, the Mortgage Bankers Association has focused its attention on information assurance.

MBA’s efforts include the Board of Directors Technology Steering Committee (BoDTech), which has developed several papers; and the MBA Government Affairs department’s consistent monitoring and debating privacy legislation and regulations. In the commercial realm, the Commercial Technology Steering Committee (CommTech) produced an international privacy paper.

In addition, MISMO has a dedicated work group on information security, while CampusMBA has security content in several programs, ranging from eMortgage Workshops to regulatory compliance. MBA also launched a strategic initiative; Secure Identity Service Accreditation Corp. (SISAC) in 2003 to provide best practices for high assurance digital credentials.

The range of MBA’s information assurance initiatives extend across the spectrum and it continues to enhance one of the strongest and most sophisticated industries in the global markets.

A recent enhancement is the Residual Technology Security Subcommittee. In forming the subcommittee, all various security artifacts were assembled and distributed. Chairperson Chris Burckhardt, CIO of Pulte Mortgage, was first to realize the plethora of good content MBA received and challenged us to better communicate them to our members. With that goal in mind, MBA has created a new landing page for security content, http://www.mortgagebankers.org/InformationSecurityResourceCenter.htm. This page will provide a consolidate list of information security initiatives and links to specific content. If your organization has interest in participating on the security sub-committee, please contact me at rschlecht@mortgagebankers.org.  

This subcommittee also recognized that education is critical to safeguard information. Therefore, through CampusMBA and MBA’s conferences, we continue to aid the mortgage industry’s information security awareness.

CampusMBA is offering a new classroom course, Information Assurance – 5 Steps to Security on June 21 in Washington, D.C. This one-day training session harmonizes legislation, regulations, audit practices and security frameworks into a comprehensive security model. It is highly recommended that information systems managers, tech officers, privacy officers and anyone interested in creating, securing, and updating privacy policies take the course.

All registrants receive a free copy of MBA's A Five-Step Information Assurance (IA) Model for Mortgage Industry Institutions, a research and analysis paper commissioned by the MBA Board of Directors Technology Steering Committee. For more information or to register for the program, please contact CampusMBA at (800)-348-8653.
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MISMO Trimester Workgroup Meeting Underway
MBA Staff
The Mortgage Bankers Association/MISMO Trimester Workgroup Meeting, sponsored by Fannie Mae, Freddie Mac, PRIA and Wells Fargo, is underway through May 24 in Bethesda, Md. Nearly 200 mortgage technology professionals are participating.

MBA Tech NewsLink and MISMO staff will provide complete coverage in the May 29 issue, including reports from each participating workgroup and news/information about new products and services.
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MISMO Seeks Secondary Workgroup Participants
Zimmer, Gloria
MISMO, the not-for-profit data standards subsidiary of the Mortgage Bankers Association, seeks members to participate in its Secondary Workgroup.

The goal of the Secondary Workgroup is to define a common set of data and a common format to support business interactions in the secondary mortgage market. By participating, MISMO can provide the following benefits to you and your organization:

Standardization of data mapping used by the industry for secondary transactions;
Enabling of business with a partner that has implemented a common industry standard;
Reduction in programming currently required for secondary transaction deliveries from multiple business partners;
Improvement of data integrity, thereby minimizing customer impact;
Implementation of a single set of standard values as opposed to multiple sets of proprietary values; and
Use of a common standard transaction set, promoting a high degree of reusability.

MISMO asks for your participation in the standards development process in the following ways:

Volunteers: participation as a volunteer entails the following: participation in bi-weekly conference calls; attendance and participation at the face-to-face MISMO Trimester Workgroup meetings; and additional opportunities to become more actively involved. Candidate job titles may include Lock Desk Personnel, Secondary Marketing Staff (Analysts, Pricing Analysts, Hedging Analysts, Rating Analysts, etc.), Standards Officer, Technology Staff (Data Analysts, Data Integration Engineers, etc.), CIOs, CTOs and Delivery Staff;

Input from Your Organization: currently, the Secondary Workgroup is gathering information and developing standards around pricing and delivery scenarios within the secondary market. If your organization would like to contribute their requirements to this development standard, we are asking for active participation and a regular volunteer. If your organization does not have the resources available to make a volunteer commitment, but would still like to submit input, we are looking for the following set of information: lock sheets (multiple versions if your organization has more than one) for pricing and locking; bulk bid tape specifications (bulk pricing fields); and delivery specifications, including data delivery fields and image delivery specifications

We encourage your organization to submit this information to our workgroup to be considered for inclusion in the standards being developed. However, without active participation, it will be difficult to fully or accurately represent your company's requirements. So, although we are requesting, and will gladly accept the above input from your organization, we encourage you to send volunteers to be able to proactively engage in the development process and answer any questions regarding submitted data.

Please note that all contributions to the MISMO standards-making process are subject to the MISMO Intellectual Policy Rights (IPR), which can be viewed at:
http://www.mismo.org/About%20MISMO/policiesandprocedures.html.

To becoming involved, submit information, or if you have any questions, please feel free to contact Secondary Workgroup Co-Chairs Mark Friend (Mark_Friend@freddiemac.com) or Arsen Ovanessoff (aovanessoff@wltcapital.com). We look forward to your participation in this industry-wide initiative.

(MISMO's mission is to develop, promote and maintain voluntary electronic commerce standards for the mortgage industry. It was established by MBA to coordinate development and maintenance of Internet based Extensible Markup Language (XML) real estate finance specifications. MISMO uses an open and democratic vendor and company-neutral approach to the development and maintenance of a single real estate finance XML transaction repository. The official MISMO web site is http://www.mismo.org.)
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Tech Briefs
MBA Staff
NYLX Inc., Mt. Arlington, N.J., a provider of on-demand point-of-sale product eligibility and pricing technology systems for the mortgage industry, and Calyx Software, makers of the Calyx Point loan origination and processing system, announced an agreement to integrate NYLX product and pricing technology into Calyx Point.

NYLX technology will now be available through Calyx Point, an integration that combines technology with functionality that mortgage brokers and direct lenders use for loan marketing, prequalification, origination and processing.

Lancaster Mortgage Taps Sollen Products
Sollen Technologies, Dallas, an Internet-based application services provider of product, pricing and best execution capabilities for the mortgage industry, announced Warren, N.J.-based Lancaster Mortgage Bankers LLC has chosen to use both Sollen’s Lender OnLine and Best Ex. 

Lender OnLine is a Web-based software solution that enables loan searching, validation, loan level adjusted pricing and locking for a wholesale, retail, correspondent or call center application. The program allows the originator to capture multiple lending options in one execution, searching loan types, loan products and documentation at the same time to find the optimal match for the borrower.

Sollen Technologies also announced improvements to its product and system management tools by simplifying the configuration site interface. The redesigned Web-based configuration site is designed to make product and pricing administration tasks easier and more user-friendly.

eLynx’s uSign Configured for Insurance Carriers
eLynx, Cincinnati, a portfolio company of American Capital Strategies Ltd., announced that its Web-based electronic signature service, uSign, has been enhanced specifically for insurance carriers.

uSign is also being used by carriers issuing memorandums of insurance to customers, enabling the applicant to electronically verify their application data via the Internet.

eLynx also announced that the SwiftView Tools division of eLynx released a new version of its SwiftView Tools services. The version supports PDF/A, Vista and IE7, and adds features designed to improve the product line's viewing, printing and conversion capabilities.

Pinnacle Introduces Community Service Program for Subprime Borrowers
Pinnacle Financial Corp., Orlando, introduced a community service program that provides free tools and resources to help borrowers avoid foreclosure.

Components of the company’s SOS: Solutions Out of Subprime program include:

* A free consumer booklet available in both English and Spanish that helps borrowers determine when their rates will reset and by how much, and provides options for mortgages that are delinquent or in default.

*A toll-free help line: 888-2-SOS-HELP (888-276-7435).

* Free seminars about the options to avoid foreclosure.

Compass Analytics Releases CompassPoint 1.3.0
Compass Analytics LLC, San Francisco, released its CompassPoint Version 1.3.0, which introduces integrated tools to enable whole loan and non-agency loan valuations and risk management. Compass Analytics LLC also announced that it had integrated with Standard & Poor’s Ratings Services’ LEVELS credit model and SPIRE cashflow model into the company’s CompassPoint product. 

Compass will also begin offering CompassPoint as a hosted ASP service that is accessible through standard web browsers. Version 1.3.0 highlights include loan-level integration to Standard & Poor’s LEVELS and SPIRE models, loan-level structured cash flow valuations and loan-level cash flow model adjustors. In addition, the models are supported by significant enhancements to CompassPoint file import tools. 

GMAC Finanical Services, Habitat Partner
Habitat for Humanity affiliates across the United States and internationally are joining GMAC Financial Services in an effort to create homeownership opportunities in partnership with families in need through the construction of 19 new homes in 2007.

GMAC Financial Services, based in Detroit, and its real estate finance subsidiary GMAC ResCap in Minneapolis, will provide funding and more than 1,000 volunteers to help build 16 Habitat homes in the United States, as well as additional homes in Canada, Mexico and Australia. The Habitat construction projects began in March and will continue throughout 2007.

FNRES Forms Marketing Partnership with Keller Williams Realty
Fidelity National Real Estate Solutions, Jacksonville, Fla., a division of Fidelity National Financial Inc., announced formation of a strategic business agreement with Keller Williams Realty, through which FNRES will market all of the franchisor's associates' property listings on Cyberhomes.

Cyberhomes displays property and neighborhood information that lets potential buyers link directly to the listing agent through his or her personal home page and e-mail.

SettleWare Technology Approved by MERS for eNote Delivery
SettleWare Inc., Laguna Beach, Calif., announced that MERS, Vienna, Va., the provider of a national eNote registry, approved its technology for delivery of eNotes into its registry. Settleware’s technology has already been approved for use by Fannie Mae for the delivery of electronically signed eNotes.

Armored Online Launches
Armored Online, Salt Lake City, announced its launch. The company provides a secure, branded channel that establishes an environment for financial institutions and their customers to communicate and transact, protecting customers from phishing, man-in-the-middle, Trojan and other attacks, to minimize the risk of online identity fraud.

Armored Online announced its first customer,