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Continuing
on our latest theme Industry
Checks & Balances ...
for those of you who entered our
industry since the Fall of 1998
(the beginning of the last
industry cycle that just ended),
this will be important news for
you especially.
Unlike the way things have been
during your career to date,
traditionally the wholesale
lenders always would complete
their ‘due diligence’
investigation to begin with,
when a mortgage broker first
asked to submit loans to them
for funding. In your experience,
if you had a loan, the
wholesalers would accept it, and
pretty much would care less who
was presenting them with the
customer’s funding needs.
Although this may seem like a
small barrier for entry to you,
once proper investigation kept a
lot of the riff-raft out of the
business. A critical check and
balance to safeguard the
wholesale lender's future. An
essential ingredient which might
have kept a hundred or more of
them from closing their doors a
short time ago.
Recently you may have become
aware, many wholesale lenders,
like Wells Fargo to name one,
are starting to require certain
production volume from mortgage
brokers, or they will no longer
do business with them … those
that are 'cut-off' and new
brokers will have to pay a fee
to be reconsidered. This is one
way to get rid of the deadwood,
and leave a smaller population
of producing mortgage brokers,
but it doesn’t necessarily
address the issue of having only
quality mortgage brokers
submitting transactions for
consideration, it is a step in
that direction, but a tiny one.
However, this approach is
another typical one at this
point in the cycle for
wholesalers.
All of them, requesting more
extensive verifiable
documentation from every
mortgage broker before they can
get approved to do business with
wholesale lenders will be next,
as they move through this
industry cycle. Before long,
gone will be the days when if a
mortgage broker has a potential
loan, then anybody would accept
it … the consequence will be
fewer mortgage broker shops,
better customer/borrower loan
portfolios, and a badly needed
cleaner stronger more solid
industry for everybody. A long
overdue return to old-fashioned
sound business practices.
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Mortgage Licensing
System Expands
The Conference of State Bank
Supervisors and the American
Association of Residential
Mortgage Regulators have
announced that six more states
will begin using their Web-based
mortgage licensing system on
July 1, bringing the total to
14. The new additions to the
Nationwide Mortgage Licensing
System are Connecticut,
Louisiana, Mississippi, North
Carolina, New Hampshire, and
Vermont. The system is designed
to automate and streamline state
licensing of mortgage lenders
and brokers. The states already
using the system are Idaho,
Iowa, Kentucky, Massachusetts,
Nebraska, New York, Rhode
Island, and Washington. More
than 5,000 companies and nearly
17,000 loan officers are being
managed by the system, the
organizations said. "This
unprecedented adoption rate is
the result of hard work begun
several years ago by state
regulators as we envisioned a
new regulatory framework that
would begin to address some of
the gaps we experienced in state
and federal oversight of the
mortgage industry," said
Gavin Gee, Idaho's director of
finance and chairman of State
Regulatory Registry LLC, the
CSBS subsidiary that developed
and operates the online
registry.
Over 400 Charged with
Mortgage Fraud
Over 400 individuals have been
charged with mortgage fraud as
the result of a national
"takedown" led by the
Department of Justice and the
Federal Bureau of Investigation.
The law enforcement operation
called "Malicious
Mortgage" netted real
estate agents, mortgage brokers,
appraisers, and others allegedly
engaged in lending fraud,
foreclosure rescue schemes, and
mortgage-related bankruptcy
schemes. So far, the three-month
sweep had led to 287 arrests and
173 convictions, and 82
individuals have been sentenced,
the DoJ said. The Mortgage
Bankers Association and the
American Financial Services
Association welcomed the
crackdown. "We support
efforts to prosecute
unscrupulous operators who give
the mortgage industry a bad
name," AFSA president Chris
Stinebert said. MBA president
Kiernan Quinn said the sweep
shows that federal authorities
are taking the issue of mortgage
fraud seriously. "We will
continue to work with the FBI to
help them target these kinds of
crimes," Mr. Quinn said. The
FBI said it has set up 42 task
groups and working groups around
the country that are
investigating 1,400 mortgage
fraud cases.
Panel Sees
Secondary-Market Bright Spots
While the private-label
origination market for
mortgage-backed securities has
largely failed to revive,
resecuritized deals are getting
done, an active whole-loan
market exists, and the GSE
market is relatively favorable,
according to panelists at the
Securities Industry and
Financial Markets Association's
due diligence conference. These
types of transactions are
"the bulk of what [the
secondary and securitized
markets] will be seeing for the
foreseeable future," said
Susan Barnes, a managing
director at Standard &
Poor's. The government-sponsored
enterprise market in particular
is "moving," and while
it is not as large as in years
like 2004 and 2005, "the
trend is good," said Rick
Sorkin, vice president of
structured transactions at
Fannie Mae.
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