By Cindi Dixon
CEO
Mela Capital Group
enhancing their procedures. Managing
risk and fighting fraud in today’s complex environment requires getting back
to basics. Now is the time to focus on
effective credit-risk best practices,
training and due diligence.
Decades ago, before subprime (aka,
nonprime) mortgages and mortgage-backed securitizations, borrowers
who wanted a mortgage loan went to
their bank. Mortgage bankers typically
knew their customers and their credit-worthiness based on personal knowledge. borrower and property evaluation
began with account reviews and firsthand neighborhood experience. Also,
mortgagors made payments to their
bank, which relied on interest income
as bottom-line revenue. Institutions
had a vested interest in loan performance because they were lending their
own capital.
today, federal regulations are once
again holding lenders accountable for
the loans they fund. brokers and other
Increasing production is the short
answer to immediate concerns many
mortgage brokers face. Generating
new business that will stand up under
the scrutiny of the secondary market’s
risk-management demands — and
that steers clear of fraudulent activity
— requires a more complex response,
however.
As grim as this news may appear,
diligent mortgage brokers can still
see light at the end of the tunnel by
3 Ways to Minimize Risk
Brokers stand on the front line of the fight against mortgage shams
mortgage professionals can modernize
these old-fashioned lending practices
for today’s competitive marketplace by
incorporating three simple strategies.
1. Pay for experienced staff
times are tough and money is tight, but
allocating a percentage of your budget to credit-risk management can be
priceless. Surely, anyone in the business today can name five mortgage
companies that are out of business and
five more involved in litigation.
“Managing risk and
fighting fraud
in today’s complex
environment requires getting
back to basics.
Now is the time to focus
on effective credit-risk
best practices, training
and due diligence.”
Frank Garay and Brian Stevens
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Others are successful and expanding even in these difficult times, however. Spending money on experienced
staff, adequate training and effective
technology today will help ensure your
doors are open tomorrow by producing
high-quality loans.
Whether you use contract or full-time
employees or outsource to consulting
firms, do your homework to ensure you
are using the best-available personnel.
this is not an area you want to scrimp on.
cheap loan production can cost you
plenty in the long run. Loan processors,
closers and operations staff should be
experienced in your line of business.
they are your due-diligence team and
mitigate high percentages of bad busi-
ness from coming through your door
based on their experience.
take the extra precautions necessary
when hiring to check references and to
evaluate prospects’ ability. Also, con-
tinually audit work through detailed
management reporting.
Loan officers are the first line of de-
fense for your company and therefore
must be knowledgeable in the applica-
tion-screening process. Your loss mitiga-
tion begins here. conducting thorough
borrower interviews and red-flag train-
ing are a must for identifying question-
able loans.
brokers and loan officers should be
included in processor, under writing and
fraud-prevention training. Experienced
loan officers can spot a questionable
deal before it hits your pipeline, and
the information they gather can be in-
tegrated with fraud-detection rules en-
gines for added protection.
Cindi Dixon, a nationally recognized credit-risk and mortgage-fraud expert and sought-after industry speaker, is cEO of Mela capital
Group. Dixon has spent 23 years in financial-services leadership and audited more than
$10 billion in mortgage loans. She develops operational policy and procedure and
provides training for the lending industry and
law enforcement. McG is headquartered in
broward county, Fla. reach Dixon at cindi@
melacapitalgroup.com or (954) 675-2319.
