Phoenix, AZ – April 25, 2012 – (RealEstateRama) — “Good morning and welcome to the Mortgage Bankers Association’s National Technology and Fraud conferences.
Wow! Look around this room. What an impressive group and I’m so glad you all could join us in beautiful Phoenix, AZ.
I’d like to thank all our sponsors for their support of these conferences. Without them, this week of information and education would not have been possible.
These conferences couldn’t have come at a better time for our industry. When I first joined MBA nearly a year ago, the future of the housing finance system looked bleak. The number one question I consistently heard was, ‘What one thing can the President, Congress, the regulators or the industry do that will get the housing market on the road to recovery?’
We all know there’s no one silver bullet that will magically make things better. The mortgage market is too complex for that. Today, we still have borrowers who can’t or won’t buy a home. They are uncertain about their job stability, are afraid of buying when home prices may still be falling or are concerned about how they will be treated by the their lender or loan servicer.
Lenders are fearful of lending because they don’t know the rules of the road, or if a loan might get pushed back on them for a minor, immaterial defect. Investors are skittish; they don’t know which way the market is headed or what new policy may come next that will impact their position.
Add to this the onslaught of government rules, regulations and policies. The mortgage finance industry is grappling with extraordinary operational and technical challenges just to comply with the regulatory pile-on that ensued.
And then there’s the trust deficit. Fair or not, borrowers, regulators, policymakers and investors all look at our industry and see the people who they blame for the worst financial crisis this country has seen since the Great Depression.
In the end, it all comes down to one thing – uncertainty. Uncertainty is what is holding the market back, and establishing certainty, at least to the best extent possible, is the only thing will get us on the road to recovery.
Some of the same concerns remain today as they did nearly a year ago, but we are now starting to see signs of recovery and growth. Optimism is beginning to emerge with record home affordability, jobs coming back and a recovering stock market.
Our country and this industry paid a steep price. Now that we are emerging from our big, black eye, we are working tirelessly to restore credibility, transparency and integrity to our business. We are implementing technological efficiencies and fraud protections to provide the best service possible to consumers.
Just as there is a need for national servicing standards to bring some sort of continuity to the wave of regulations, there is also a need for cost-effective compliance solutions so costs of doing business are not passed on to the consumer. Compliance with the tidal wave of regulations is difficult and expensive.
Aligning data definitions and formats would help clear the muddy waters of compliance requirements. Don’t worry. I’m not suggesting another regulation, because it’s not needed. We should leverage an already existing, completely voluntary, consensus data standards system – MISMO.
To reduce costs and increase efficiencies, there’s an easy solution – E-signatures. This is a consumer-friendly way to prevent drowning in a sea of forms and paperwork.
With FHA, Fannie Mae and Freddie Mac encompassing 90 percent of the housing finance market, there’s a great dependency upon GSE systems adding to uncertainty about secondary markets. MBA has been a thought leader in sketching out potential solutions for the secondary market, but we are still far from a resolution. Everything from processes to systems in addition to their central roles as investors and credit guarantors lies with the GSEs.
The industry has had a number of very tough years. MBA has as well. Just like any other organization or business during the worst of the downturn, we had to make some tough decisions of where to slim down and we stepped back from the tech space.
As the new guy, I see the tech space as an area of opportunity; an opportunity for efficiencies, cost benefits, and growth. MBA is committed to supporting industry standards and the development of industry technology, as evidenced by the Tech Conference.
MBA’s Residential Technology Forum, also known as “ResTech”, has been very active in setting and achieving priorities. Let me touch on the four I briefly mentioned just a few moments ago – MISMO, E-signatures, information security and GSE IT.
Due to changes in the regulatory environment over the last two years, the benefit of implementing data standards across the real estate finance industry has never been greater. Significant new reporting requirements highlight the need for a common vocabulary and data exchange mechanism. The continued enhancement of data standards and transparency are critical to the return of investor confidence and liquidity in our marketplace. The utilization of a single, consensus industry standard will also greatly reduce compliance costs for the mortgage industry.
Our top priority – MISMO. Any company operating in the mortgage industry today needs to be concerned about the quality and consistency of their data. The MISMO standards provide a voluntary, consensus, industry standard to facilitate the exchange of data that is consistent and of high quality.
The MISMO standard can appear complex with over 5,000 separate containers. However, the alternative to a comprehensive industry standard would be multiple proprietary approaches. We have been down that road before, and did not end well.
One service provider reported that using MISMO standard XML data transactions reduced interface development time from six months to just a few weeks.
Fannie and Freddie have adopted MISMO, as has Ginnie, VA, and the USDA. The regulatory agencies, including CFPB, SEC, the Fed, and FDIC have been quite receptive to utilizing MISMO in future data collection efforts. When new lending standards come out, companies will have to convert anyway, so why not get ahead of the game and start saving your customers time and money now?
There is a MISMO model at our booth downstairs – booth number 105 – and you can also visit our website www.mismo.org. While you’re there, you’ll see there are four ways to get involved. You can join a MISMO working group, start using a MISMO standard, become a MISMO subscriber or you can sign up to attend MISMO’s June Trimester Meeting in Santa Ana, California. This Trimester will offer exciting educational sessions for those who want to be “Data WISE and Document SMART”, covering both business and technology disciplines.
Technology knows no bounds and I envision a system that includes more than just data standards. Plans are already in the works to expand to forms and information security. Our data can never be safe enough. Adding security features will go a long way to gaining trust.
Ask any of your customers what one thing they would like to eliminate most from the loan process and I can almost guarantee you it will be paperwork. Am I right? I’m sure you could deal with a little less paper too. In the world of e-filing and e-faxing, why are we still caught up in the nineteenth and twentieth century way of handling forms?
MBA has been active – meeting with IRS staff, and lobbying Congress – encouraging the IRS to prioritize this effort. The IRS will be here on Wednesday to preview an e-signature solution for the Form 4506-T. The form is used literally millions of times per year, as originators and servicers rely upon the income verification express service (IVES) to verify borrower income. With this effort, the industry (and ultimately consumers) will save millions of dollars per year.
Similarly, there are many opportunities for utilizing e-signatures with FHA lending. We are continuing to urge FHA to place a high priority on adopting e-signatures on all disclosure forms as soon as possible.
Different lenders are also requiring different approaches to protecting personal information. This leads to significantly high costs for any institution that touches data at multiple companies. Careful protection of personal information is a clear responsibility for lenders. One, consolidated industry standard will bring much-needed trust, security and cost efficiencies for consumers, lenders and servicers.
There are several bills before Congress right now that would liquidate the GSEs over a short horizon. With hundreds of IT systems within the GSEs, careful consideration must be given to just how integrated the GSEs’ systems really are into the broader industry. To that end, ResTech has already launched an effort to list the industry’s dependencies on GSE IT systems.
Finding cost efficiencies and modernizing our industry technologically will put us on a path to a more stable, certain environment. But, we should also use technology to identify fraud and regain trust.
According to CoreLogic’s 2011 Mortgage Fraud Trends Report, distressed sales remain a source of significant risk. It’s estimated that unrealized recoveries on suspicious short sale transactions may be costing lenders as much as $375 million per year. Unscrupulous investors, unethical real estate agents and other fraudulent loan actors in the mortgage application process are targeting distressed borrowers and arranging same day flips through the foreclosure and short sale processes.
Increased enforcement, better communication and further innovation is required in order to adequately protect the industry, as well as consumers, taxpayers and communities, from the costs of mortgage fraud. Therefore, we have taken significant steps to prevent fraud, report fraud and reduce the cost of loan repurchase requests.
First, we have improved communication with law enforcement and increased the ability to report fraud. MBA’s Fraud Issues Subcommittee has developed two “report fraud” contact lists – an intra-industry contact list and an external database of hotlines which can be found on our website at www.mortgagebankers.org/fraudcontacts.
These lists serve to enhance the network among our industry as well as between lenders and the law enforcement agencies to help us investigate and prosecute instances of mortgage fraud.
Second, MBA is coordinating with the Treasury Department’s Financial Crime Enforcement Network, or FinCEN, to ensure that our non-depository lender members are informed and educated about the processes required under an anti-money laundering, or AML, requirement and how to effectively report suspicious activity by filing suspicious activity reports.
Previously only financial institutions, including banks but not non-depository mortgage lenders, were required by FinCEN to have anti-money laundering programs under the Bank Security Act. After working with FinCEN through the rulemaking process in 2009, the AML requirements do expand to non-depository lending institutions, but to only filing suspicious activity reports.
Due to our coordination with FinCEN in expanding this regulation, federal financial regulators and law enforcement agencies will now have a fuller understanding of the mortgage fraud activity occurring. We are also optimistic that it will help federal law enforcement agencies investigate and prosecute those that seek to take advantage of our real estate finance system.
Keeping homeownership affordable is a tough job and the secondary mortgage market and other mechanisms help, but preventing losses from fraud is another critical part of our mission.
The rule is in effect but full compliance isn’t expected until August 13, 2012. MBA is working with FinCEN to provide webinars on complying with these expanded regulations and those details will be available very soon, so stay tuned for pending announcements.
Finally, while MBA is working with the GSEs and FHFA on addressing the issue of repurchases from a policy stand point, we must also manage risks by detecting attempts to acquire property that is unsupported by underwriting or to use the mortgage lending-process for pure profit. The cost of our lenders having to buy back loans due to omissions, obvious fraud and errors has been a burden on almost every originator. You are on the front lines of developing a keen awareness of what or who is taking advantage of our businesses.
It’s going to take each and every one of us working together to bring an end to this era of uncertainty and regain public trust. MBA is the industry leader in bringing standards and consistency amidst a massive data system already complicated by the regulatory pile-on.
So please join us in leading the industry to utilizing a cost-efficient and reliable data system that will bring consistencies to an already cumbersome system. Subscribe to MISMO and share the benefits with your colleagues. Join a MISMO working group and start using a MISMO standard. You can event start today by going to booth 105. The team will answer your questions and get you started on the path to one, consistent data system.
Through technological and communication advances, MBA is helping protect consumers and mortgage investments. It takes each and every one of us to have a watchful eye and I invite you to support MBA’s Fraud Issues subcommittee any way you can. Take a look at our fraud prevention contact lists and help us add to it. Go to www.mortgagebankers.org/fraudcontacts and then give us a call or drop us a note. Restoring confidence and protecting investments cannot be underestimated.
Through technology and fraud prevention, we can deliver cost-saving efficiencies to our customers while instilling a sense of trust, security and stability back into the marketplace.
This week, we’ve got some incredible sessions and fantastic speakers for you to learn about technological advances in our industry and the strides we’re making to reduce fraud.
We’ve brought you representatives from CFPB and the IRS. You’ll have the opportunity to participate in a CIO panel to ask industry experts what they’re doing to enhance information technology in their business.
I encourage you to attend the National Fraud Prevention panel, featuring James Freis, Director, FinCEN and inspector generals from HUD, SIGTARP and FHFA. Other discussions that may be of interest are the Federal Expansion: CFPB Over Mortgage Banks, and Mitigating Short Sale Fraud.
Thank you for attending these important, informative conferences this week.”
The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation’s residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA’s Web site: www.mortgagebankers.org.