Mortgage technology

The Federal Housing Finance Agency has launched a major new initiative by Freddie Mac and Fannie Mae to improve the consistency and quality of data for appraisals and other loan information, said the government entity on its website, which has both GSEs mandating the use of MISMO Version 3.0 data standards. "FHFA directed the enterprises to undertake the development of the standards to provide greater uniformity in the data they collect," said FHFA acting director Edward DeMarco. "This initiative is a major step toward meeting industry requests for uniformity in appraisal and loan data. Improvements in data quality will benefit all mortgage market participants and strengthen the housing finance system." The GSEs have now gone forward to standardize mortgage lending using MISMO as the backbone of all loan delivery to both GSEs. Specifically, Freddie Mac and Fannie Mae have developed the Uniform Loan Delivery Data Specification, which defines the Uniform Loan Delivery Dataset and the common GSE approach to single-family loan delivery data requirements for all mortgages that will be delivered to either GSE on or after Sept. 1, 2011.

Experian has expanded CreditHorizons for Securities, which delivers Experian's consumer credit information for nonagency mortgage-backed security deals, to offer the ability to link consumer credit data to Lewtan's private-label deal library, ABSNet Loan. This capability expands the CreditHorizons for Securities offering to a broader base of nonagency residential mortgage-backed securities investors. By linking consumer credit data to loan-level data, CreditHorizons for Securities provides an additional set of influences that helps investors better predict delinquency and default probabilities, obtain more granular data about the underlying collateral and understand how consumer trends impact their RMBS portfolios. Using a proprietary matching algorithm developed by Experian's credit and industry experts, Experian has achieved a high consumer-to-loan match rate in linking to Lewtan's data.

DocMagic Inc. has filed an amended complaint against Ellie Mae that expands the initial charges the former company levied against the latter. The amended complaint was filed in United States District Court (San Francisco) and is Case No. 3:09-CV-4017-MHP. Back in August 2009, DocMagic filed two lawsuits against Ellie Mae: one in Federal Court for antitrust violations, intentional interference with contractual relationships, interference with prospective economic advantage and unfair competition; and one in San Francisco Superior Court seeking a permanent injunction against Ellie Mae arising out of Ellie Mae's alleged misuse of DocMagic's proprietary information in connection with the Ellie Mae Docs system. At the urging of the federal court judge, the parties have since agreed to consolidate the state case claims into federal court and to dismiss the state case without prejudice. The amended complaint sets forth 14 federal and state claims, expanding on the allegations and claims initially made against Ellie Mae. The amendments include expansion of antitrust allegations and claims, including explanation of market definitions, monopoly leveraging, attempted monopolization, refusal to deal, and denial of access to essential facility (all federal violations of Section 2 of the Sherman Act). Charges of unfair competition and false advertising; copyright infringement; and trade secret misappropriation were also included in the amended complaint. DocMagic is also seeking a declaratory judgment that DocMagic did not infringe upon Ellie Mae's copyrights and that Ellie Mae has no claim to the ownership of its client's loan data. When asked to respond to the amended complaint advancing the lawsuit Ellie Mae said that it had no comment.

Valligent, a provider of appraisal review services, has introduced V-Cert, a new product which moves the quality control function to the front of the origination process. Jeremy McCarty, chief executive and chief valuation strategist of the Roseville, Calif.-based company, said one of the reasons he is attending the Mortgage Bankers Association trade show in New York is to meet with Wall Street investors and rating agencies to get them familiar with this concept. Issues over collateral are a major source for the lack of confidence in the market from an investor standpoint, he said. Doing the review before the loan closes will let secondary market purchasers know that if they buy a loan that eventually goes bad, at least the valuation was done properly. The V-Cert review includes an USPAP-compliant desk review, a fraud and foreclosure risk analysis and a value determination.

Calyx Software has expanded The Calyx Network with an interface update that provides links to new compliance, fraud prevention and verification vendors. The Calyx Network allows users of the Calyx Point LOS application to connect directly with lenders and mortgage service providers, automating data exchange. The May update contains a new connection to three new mortgage service providers including fraud detection and compliance vendor Interthinx Inc., product and pricing vendor Mortgage Pricing System and verification services T Transcript Processing. The Calyx Network interface update is automatically installed into Point versions 7.0 and higher when users open their software and connect to the Internet.

Fidelity National Information Services, which manages the largest residential servicing bureau in the nation, confirmed that buyout talks with Blackstone Group and two of its partners have ended. A leveraged buyout for the payment processing company could have reached $15 billion. The consortium bidding for FNIS pulled out because of a disagreement over price, according to combined press reports. FNIS' servicing platform has a market share approaching 70%, according to past research conducted by National Mortgage News and MortgageStats.com. The publicly traded FNIS, which was spun off by Fidelity National Financial, the title insurance giant, saw its share price fall 5% Tuesday to $27.50.

Clayton Holdings LLC, a risk analytics firm, said it has adopted new Fannie Mae promulgated quality control standards into its product offerings. The Shelton, Conn.-based Clayton said Fannie's requirements (mandated in lender letter LL-2010-03) requires GSE originators to create "written operational work flow procedures" and increases both post- and pre-closing work. Among the new chores, lenders must confirm ten basic data elements prior to closing.

Shares of Fidelity National Information Services rose for the second day in a row as rumors continued to circulate that the mortgage technology giant is in talks with the Blackstone Group LP concerning a buyout. In trading late Friday, FNIS' share price was relatively flat after soaring more than 15% Thursday-a day in which the Dow fell by almost 1,000 points before recovering. To date, Fidelity and Blackstone have declined to comment. Greg Smith, a managing director at Duncan-Williams Inc. who follows the sector, said he is "not overly surprised" that Fidelity would be an acquisition target, given "prior leveraged buyout interest" in the industry. For example, Kohlberg Kravis Roberts & Co. bought Fidelity competitor First Data Corp. for about $29 billion in 2007. First Data and its rivals have several features that are attractive to private-equity investors, including a "high degree of recurring revenue, strong free cash flow and relatively low valuations," Smith said. "I think you have all of that with FIS today." Last week Fidelity reported its first-quarter revenue surged 57.4% from the year earlier, to $1.25 billion, fueled by higher demand for its technology and its 2009 purchase of competitor Metavante Inc.

First American Corp., Santa Ana, Calif., has received consents from more than half of the holders of its 7.55% senior debentures due 2028 to amend the indenture, clearing another hurdle for the division of its information solutions and financial services businesses into separately traded public companies. The company needed the approval to make the change, as well as the previously received approval of holders of two other debt issues to make a similar change, so the split would not conflict with the terms of those indentures. The separation remains scheduled to take place on June 1. First American extended its tender offers to purchase the 7.55% senior debentures, its 5.70% senior notes due 2014, its 8.50% capital securities due 2012 and the 7.55% trust certificates issued by the Preferred Plus Trust Series Far-1 due 2028 to May 12 at 5 p.m., Eastern Time. Over 99% of the 5.70% senior notes have been tendered for purchase so far, along with 65% of the capital securities, 40% of the 7.55% senior debentures and 48% of the Preferred Plus certificates.

CUSO Prime Alliance, Tukwila, Wash., has acquired Dexma, a provider of online mortgage lending technology to more than 1,400 institutions. The combined company will be known as Prime Alliance Solutions. Joe Brancucci, CEO of Prime Alliance, noted that Dexma, Edina, Minn., helped create Prime Alliance, lending a certain amount of irony to the deal. "It is like a child is swallowing up one of its parents," he told Credit Union Journal, a sister publication to National Mortgage News. "I think it's a good move for a lot of reasons. We were ahead of our time in 2001, but today there are lots of opportunities." Financial terms of the deal were not disclosed. According to Brancucci, Prime Alliance has worked closely with Dexma over the past decade in creating new solutions for mortgage lending, especially to credit unions. He said the acquisition will allow the CUSO to take ownership of the technology Dexma produces. "We've always been part of the dialog, and have driven the development of a lot of aspects, but this takes the relationship to a new level." Prime Alliance and Dexma co-developed the Mortgage Lending Suite, which includes retail lending, third-party lending, loan fulfillment and secondary market centers. The two said they combine to handle 35% of credit union mortgage originations. Dexma's clients include U.S. Bank Home Mortgage, Weichert Financial Services and MetLife Home Loans. Since inception, more than 6 million loans have been processed on the Dexma platform, totaling approximately $1.1 trillion in loan volume.

ComplianceEase technology has been adapted to help originators keep compliant in the face of California's new high-cost lending law. ComplianceEase's ComplianceAnalyzer tool has been updated to enable lenders, brokers, and regulators to identify, in seconds, whether a loan falls under the new "higher-priced" category. Simultaneously, and on a single report, the system includes tests for the various federal statutes that can also place California lending licenses at risk under the new law. Under the new law, starting July in California there will be a new category of loans called "higher-priced mortgage loans." If a loan meets the attributes and thresholds that place it in the "higher-priced" category, originators face prohibitions regarding making "deceptive" or "misleading" statements about the loan to borrowers. Since it will be possible for civil penalties to be as high as $10,000 and directly assessed against individuals, lenders and brokers will need to know whether each loan they originate will be subject to the new restrictions and may make decisions about whether or not they decide to continue originating the new category of loans. California's restrictions in this area follow a growing trend among states to create a "higher-priced" category that is intended to subject a larger quantity of loans to additional restrictions. So far seven other states have created similar loan categories with increased restrictions.

A risk analysis firm said it is helping mortgage professionals access tax return amendment data that more common industry tax form verification efforts do not include in order to head off a growing fraud concern. The National Credit-Reporting System Inc. (NCS)/Credit Central, Egg Harbor, NJ, said it has added to its report that summarizes tax return transcripts a summary of the IRS's Record of Account transcript. The IRS Tax Return Transcript more commonly used by the industry does not provide information on amendments to returns, said Cecil Bowman, an NCS senior vice president and former IRS senior manager. The company instead recommends data from the Record of Account transcript that does include this information along with taxpayer identification number verification.

Mortgage software provider Ellie Mae filed to go public Monday morning after posting $38 million of revenues in 2009 and a profit of $1.7 million. The company offers no estimates on how much stock it will sell-or at what price-but notes in its IPO filing that its privately held shares have an estimated value of $47.2 million or $4.69 a share. The firm has entertained buyout offers over the past few years, but never completed a sale. The Pleasanton, Calif.-based company, known for its Encompass software, lost money in 2008 and earned a meager profit in 2007. In its S-1 filing with the Securities and Exchange Commission, the 13-year old firm says its Ellie Mae electronic network connects 55,000 mortgage professionals to lenders and service providers. In 2009, roughly 2.8 million of loans were initiated over its network-or about 20% of the market. Discussing the risks of its business, Ellie Mae cautions about "extreme turmoil" in the residential business, noting that its future performance hinges on attracting more customers to Encompass. Goldman Sachs & Co. is listed as the lead underwriter of the offering.

Chicago Bancorp, a retail mortgage banking company, has hired Jeffrey Walker as the new president of Chicago Bancorp Direct, its direct-to-consumer lending platform. Most recently he was with CitiMortgage Inc. where he was the managing director/executive vice president of national sales and lending. In his new role, Walker will be responsible for expanding the company's national footprint through Internet lending, call centers, and strategic partner relationships. He will be based in Chicago and assume his new responsibilities with the firm on May 1.

When the Information Solutions Group of First American Corp. becomes a separately traded public company, it will take the name CoreLogic and trade on the New York Stock Exchange under the symbol CLGX. The spin-off is targeted for June 1. The title company will be part of First American Financial Group, which will retain the FAF ticker symbol. The new CoreLogic will encompass more than 20 different business lines, making it larger and more diverse than the entity currently known as First American CoreLogic. Meanwhile, two sets of First American bondholders have approved debt tender offers and consent solicitations. The approvals by those who hold the 5.7% senior notes due 2014 and the 8.5% capital securities due 2012 expressly affirm the spin-off transaction. A third solicitation for the holders of the 7.55% senior debentures due 2028 remains in progress, with 43% tendered so far.

Mortgage broker usage in Canada has remained stable during the past year, according to Canada Mortgage and Housing Corp.'s annual online consumer survey. The use of mortgage brokers by first-time buyers remains at about 45% and approximately one-third of repeat buyers continue to use brokers. Use of brokers to refinance remains stable at roughly 23%, where it has been since 2006. The survey also shows Canadians' confidence that homeownership is a good long-term investment has remained stable to slightly higher, with 92% agreeing with this statement in 2010 compared to 90% in 2009. The online survey polled more than 2,500 active mortgage borrowers.

Lender Processing Services, a third-party service provider to the mortgage industry, earned $76.7 million in the first quarter, compared to $60.6 million in the same period a year ago. LPS reported consolidated revenue of $592.4 million for the first quarter of 2010, an increase of 11.8%, compared to the first quarter of 2009. "LPS is off to a strong start in 2010 despite difficult market conditions and a challenging broader macro-economic environment," said Lee A. Kennedy, executive chairman of the company. "Our loan facilitation business posted record growth in a sluggish year-over-year origination market as we continued to gain market share." He noted that the firm's default services division posted strong gains as well.

First American CoreLogic, a provider of advanced property and ownership information, analytics and services, is partnering with The Prieston Group to offer a comprehensive fraud prevention and insurance solution to mortgage lenders. The solution combines First American CoreLogic's pattern-recognition fraud tool with TPG's risk management services, indemnity programs and training. Through this partnership, TPG will help lenders establish business rules and guidelines and employ the First American CoreLogic LoanSafe Fraud Manager tool to enforce those policies in the lender's daily operations. Lenders who use this joint solution will be insured against fraud losses by Lloyd's of London, which has a special relationship with TPG. The anti-fraud tool integrates patented pattern-recognition technology with a national property and fraud database. Tim Grace, senior vice president of fraud solutions at First American CoreLogic, said fraud is a $13 billion problem for the lending and investor communities. "This partnership will help lenders focus on best practices, products and processes and provide enterprise- and loan-level metrics to measure results. Our new joint effort will improve loan quality and rebuild confidence levels among lenders and investors," added Arthur Prieston, TPG's chairman.

Technology provider ISGN Corp. is partnering with EquityRock, a company with experience in residential real estate equity sharing, to create RESET, a loss mitigation solution for lenders. The product's creators say they can help lenders reduce losses from properties in imminent danger of foreclosure, while also keeping the borrower in the property. RESET (Real Estate Shared Equity Transaction) gives a borrower who is qualified for a loan modification a principal reduction in exchange for a share in equity with their lender. With RESET, in addition to modifying or refinancing the borrower's mortgage, the lender writes down the borrower's principal balance so that the borrower no longer owes more than the property is worth, ensuring they have equity in their property, says ISGN. As part of the transaction, the lender will gain a stake in any future appreciation should the property be sold or refinanced. When the transaction is complete, the borrower gets to stay in the home and keeps a monetary stake in the property. A key feature of RESET is a fair, debt-for-equity exchange that benefits both the lender and the homeowner. The service can be used by lenders and investors, as well as by housing finance agencies in support of the Treasury Department's Help for the Hardest-Hit Housing Markets (4HM) program. An estimated 3.7 million homeowners across the five states targeted by 4HM have negative equity with loan to value ratios that exceed 125%.

Equator, a provider of automated default servicing, REO and short sale technology in Los Angles, has hired John Vella to serve as its chief operating officer. Vella will be leading efforts to further expand the scope of the company's EQ Workstation, an online system that provides financial institutions with tools for managing default servicing and the EQ Marketplace, which acts as an ecommerce forum where these institutions connect with asset management vendors and real estate agents. Vella has more than 27 years in the mortgage industry. Previously, he worked as executive vice president of GMAC/Rescap, which is responsible for special servicing; president and chief executive officer of EMC Mortgage, a subsidiary of JPMorgan Chase; CEO of Household Automotive; chief administrative officer of Option One Mortgage and director at Freddie Mac and the FDIC.