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By Michael Zwall
Director of mortgage services
SOURCECORP Inc.
At the Corner of Trouble and Outsourcing
When it comes to advising clients and servicers on foreclosure-avoidance options, take this crash course
Owning property is an important part of the american dream. But with plummeting real estate prices, elevated unemployment
rates and negative equity contributing
to unprecedented rates of mortgage
delinquency and foreclosure, many
homeowners risk seeing their american
dream disappear.
Mortgage brokers can help stop that
from happening, provide assistance
when a mortgage can no longer be
saved, and advise loan servicers about
enhancing loan-modification and short-sale processes.
The Home affordable Modification
Program (HaMP), introduced in 2009,
is part of the Obama administration’s
comprehensive Financial Stability Plan
and aims to give eligible homeowners
an opportunity to modify their mortgages. Brokers can inform past clients
of HaMP’s options and guide them to
online resources, such as an eligibility
questionnaire at sctsm.in/HaMPeq.
Despite the positive effects HaMP
has had in the past two years, foreclo-
sure inventories in many areas continue
to increase. In many cases, homeown-
ers can’t effectively complete the
HaMP process because of incomplete
documentation or re-default on a modi-
fied loan.
Turning to outsourcing
HaMP and HaFa are scheduled to run
through the end of 2012 and put in-
creased burden on servicers, which of-
ten struggle to keep up with the volume
of work required to complete short sales
successfully. Servicers are further chal-
lenged by a lack of resources and stand-
ardized business processes to support
these programs. Many wind up essen-
tially as loan originators, helping home-
owners explore their options to make
sure they land in the proper program.
Michael Zwall is the director of mortgage
services for SOURCECORP Inc. Zwall has more
than 20 years of operations and financial-management experience in the mortgage
industry. He has worked as a loan consultant, operations manager and business-development leader for Wells Fargo, Guild
Mortgage and accredited Home Lenders. He
delivers clients valuable insights and project-management expertise. Zwall is instrumental
in assisting clients with process improvement
and best practices. E-mail michaelzwall@
scrp.com or visit www.sourcecorp.com.
By Vince Parlove
President
Michigan Mutual Inc.
Facing Down Changes
Could Prove Pivotal
Stay ahead of compensation rules by remaining
vigilant and voicing insightful ideas
As the saying goes, change is the only constant, and mortgage brokers, lenders and loan originators certainly understand that dictum.
Right now, we are witnessing a cascade
of responses to several unprecedented
years of turmoil in mortgage lending. We
already have seen the U.S. Department
of Housing and Urban Development’s
expanded good-faith estimate (GFE).
In addition, strict, mandatory licensing
protocols have taken effect. and coming soon — april 1, if things remain as
planned — is the implementation of Federal Reserve Board regulations governing loan-originator compensation.
But the story doesn’t end there.
Changes in response to provisions in
the Dodd-Frank Wall Street Reform
and Consumer Protection act are sure
to follow.
Mortgage professionals must understand the new requirements and
interpret the uncertainties that will undoubtedly arise. Moreover, we should
consider our responses and plans for
continued success no matter what
comes our way.
Guidance limited
The sweeping changes called for in the
Dodd-Frank act include those named in
Title XIV, aka the Mortgage Reform and
anti-Predatory Lending act. Section
1403 addresses loan-officer compen-
sation specifically with its prohibition
on steering incentives. With respect to
compensation, it states:
“For any residential mortgage loan,
no mortgage originator shall receive
from any person and no person shall
pay to a mortgage originator, directly
or indirectly, compensation that varies
based on the terms of the loan (other
than the amount of the principal).”
as with most legislation, federal regu-
lators will be responsible for filling in the
blanks. In this case, they must create
the actual rules that will guide originator
actions and enforce the legislation’s in-
tent. The most important regulator with
authority over the Dodd-Frank act, how-
ever, isn’t yet functional: The Consumer
Financial Protection Bureau (CFPB) is set
to assume authority under the act’s pro-
visions no later than July 21.
Putting aside that less-than-minor
detail, the concept behind loan-origina-
tor-compensation regulations appears
simple: a loan originator’s compen-
sation shouldn’t vary according to a
loan’s terms and conditions. The imple-
mentation of that concept, however, is
proving complex.
as of press time, the Federal Reserve
had provided limited written guidance
on its regulation. This could be harmful
to consumers and problematic to the
mortgage industry as a whole.
drastically contracted mortgage-lending
industry. If the final regulations don’t allow loan originators to reduce their
compensation voluntarily to cover borrowers’ costs or fees at closing, as has
been common, mortgage costs likely
will increase. Ultimately, the loss of
wiggle room will mean consumers must
bring more cash to closing.
Furthermore, the idea that retail loan
officers, mortgage brokerages and
mortgage brokers’ loan originators
will be treated equally under the act
sounds good but may create many difficulties in practice. Brokers and their
originators have been given financial
incentives for the extra work and value
of shopping loans in borrowers’ best
interests — and in navigating more-complex transactions.
Going forward, it looks as if it will
be more difficult to compensate bro-ker-affiliated originators based on the
continued on page 38 »
Chilling impacts
Overall, we can expect the Dodd-Frank
act and the penalties it supports to have
a further chilling impact on an already
Vince Parlove is president of Michigan Mutual
Inc., based in Bingham Farms, Mich. The company purchases mortgages from independent
mortgage brokers, banks and credit unions.
For more information, call (248) 203-1340 or
visit www.michiganmutual.com.
