Mortgage technology

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.

ServiceLink, provider of origination and default services based in Pittsburgh, Pa., and Fidelity National Financial's national lending platform are opening a new office in Rancho Cucamonga, Calif. and are expanding an existing operation in Buffalo, NY to support their growing loss mitigation operations. Outfitted with ServiceLink's technology, both locations aim to provide loss mitigation services to ServiceLink's lending clients. The new office in Rancho Cucamonga, Calif., opens today and will occupy over 19,000 square feet. The expanded Buffalo, NY, office will officially open on April 26 in a 15,000 square foot facility. "This expansion has doubled our loss mitigation capacity and allows ServiceLink to focus on assisting its clients in managing their troubled assets as the market continues to stress the capacity of lenders and servicers," said Jeff Coury, ServiceLink President and CEO. The company also has existing loss mitigation operations in Kansas and Virginia that provide outsource loss mitigation services including HAMP processing, HAFA, short sales, and deeds in lieu.

The Federal Housing Administration will begin accepting electronic signatures on third party documents originated and signed outside of the lender's control, such as real estate contracts. A Mortgagee Letter detailing FHA's new streamlined process is posted on the HUD website. "This is just the beginning of FHA's commitment to use more electronic documents in our loan approval process," said FHA commissioner David Stevens. "Over time, we will be expanding the number and types of documents with electronic signatures which will be acceptable to FHA." The FHA expects lenders to employ the same level of care and due diligence with electronically signed documents as for paper documents with "wet" or ink signatures. Lenders are reminded that the electronic signature and date should be clearly visible in the document and that electronic documents will be subject to the same document retention requirements as paper documents.

Wells Fargo is the newest lender to implement First American CoreLogic's LoanSafe Fraud Manager in order to minimize loss from fraud and increase operational efficiency, according to First American Core Logic, Santa Ana, Calif. In addition to Wells Fargo, the technology tool is now in active evaluation with 10 other lenders, signaling significant market momentum for the solution and continued lender focus on solving the mortgage fraud problem. First American CoreLogic fraud scientists have created patented fraud models that assign each loan a fraud risk score spanning from one (lowest risk) to 999 (highest risk). By using these scores, lenders can realize revenue increases through quicker and more efficient underwriting and increase revenue by reducing default and foreclosure-related losses associated with fraud. The solution now also offers improved reporting with more loan information categories displayed and alerts grouped by likely fraud types. Additionally, this new fraud detection solution offers more input fields for greater functionality and tracking. The First American CoreLogic 2X guarantee promises that lenders will save twice as much in fraud losses as they did prior to using LoanSafe Fraud Manager and the savings will be at least twice as much as the cost of the solution.

Lender Processing Services says it has corrected the way it processes assignments of mortgages in foreclosure cases, which has drawn the attention of class action attorneys and a U.S. Attorney in Florida. The Jacksonville, Fla., company said an internal review of its Docx LLC subsidiary "identified a business process that caused an error in notarization of certain documents, some of which were used in foreclosure proceedings in various jurisdictions around the country." The U.S. attorney's office for the middle district of Florida is conducting an inquiry of the matter. LPS is "fully cooperating" with the U.S. Attorney, a spokeswoman said. In February, a class action lawsuit filed against Deutsche Bank (National Trust Bank) and U.S. Bank N.A., LPS and Docx alleged that the practice of creating assignments months and years after the actual date of the transfer from one owner to another is unlawful. The plaintiff's attorneys have dropped the lawsuit. However, the lawsuit pointed out that LPS and Docx assists Deutsche Bank (National Trust Bank) and U.S. Bank N.A., in filing foreclosure actions. LPS also has responded to an inquiry by the Clerk of the Court of Fulton County, Georgia. "LPS has since completed its remedial efforts with respect to all of the affected documents and believes the Clerk of Court has completed its review and closed the matter," LPS said.

The Treasury Department could move faster in modifying second liens, a mortgage securities analyst says, by requiring servicers to conduct their own internal matching of first and second liens. Using their internal systems, Home Affordable Modification Program servicers could "capture approximately half of the second liens backing modified first liens," according to an Amherst Securities Group report. However, Treasury has contracted with Lender Processing Services to build and maintain a database of second liens that may be eligible for the HAMP second lien modification program (2MP). Servicers are required to use LPS to identify eligible matches. The LPS matching project is "far more cumbersome than it needs to be," said ASG senior managing director Laurie Goodman. "This unnecessarily delays the implementation of the 2MP program to the benefit of the second lien investors which are the largest banks," Goodman said.

At a briefing of state housing counselors, Congressman Steny Hoyer and Maryland Department of Housing and Urban Development Secretary Raymond Skinner both expressed their support for HOPE LoanPort, the new counselor Web-based tool that streamlines submission of completed loan modification applications, including those used for the Home Affordable Modification Program. This effectively makes Maryland the first state in the nation to publicly endorse the HOPE LoanPort program. In a room full of Maryland housing counselors, mortgage servicers, state officials and others; Congressman Hoyer praised housing counselors for their efforts and Secretary Skinner discussed the need for improved technology in assisting at-risk homeowners with loan modifications. HOPE LoanPort currently has eight mortgage servicers and more than 100 nonprofit counseling organizations across the country committed to its program.

HOPE LoanPort, the new counselor Web-based tool that streamlines submission of completed loan modification applications, including those used for the Home Affordable Modification Program, has named six people to serve on its board of directors. The organization also named its CEO. There are plans to expand the Board in the near future to reflect the diversity of the organizations involved with this web portal initiative. Larry Gilmore, currently the deputy director of the HOPE NOW Alliance, will assume the day-to-day management of HOPE LoanPort. The following individuals will make up the board of directors: William Longbrake, an executive in residence at the Robert H. Smith School of Business at the University of Maryland where he works on a variety of business, policy and governance issues; John Dalton, former Secretary of the Navy in the Clinton administration; John Courson, the president and CEO of the Mortgage Bankers Association; Faith Schwartz, the executive director of HOPE NOW; Kenneth Wade, the CEO of NeighborWorks America, a public nonprofit corporation established as the Neighborhood Reinvestment Corp. by an Act of Congress in 1978; and Camillo Melchiorre, senior vice president of loss management for Radian Guaranty Inc.

CitiFinancial, a nonbank that was once a powerhouse in subprime lending, Wednesday agreed to pay a $1.25 million fine for not correctly reporting its residential origination data to the Federal Reserve via the Home Mortgage Disclosure Act. The settlement, however, was not between the Fed and CitiFinancial but instead was worked out by state banking supervisors who discovered the reporting problems as part of a probe into compliance with consumer protection laws. The deal was worked out between CitiFinancial, an affiliate of Citigroup, and The Conference of State Bank Supervisors/American Association of Residential Mortgage Regulators. (Roughly 35 states were party to the agreement.) The reporting violations occurred on 91,127 loans between 2004 and 2007. Prior to that, the lender was in compliance, regulators said. According to CSBS, CitiFinancial of Baltimore, failed to report the loans in its HMDA filings. The lapse was caused by "internal system errors" at the nonbank, said CSBS. CitiFinancial eventually submitted HMDA reports on the loans in question. Regulators said that even though the loans were omitted by CitiFinancial the lender's behavior "does not in any way demonstrate a pattern or practice of discriminatory lending." The loans accounted for about 10% of CitiFinancial's production volume during the time in question.

MRG Document Technologies in Dallas, a provider of mortgage document preparation, has been named a RegulatorConnect Certified Partner by ComplianceEase, which means that lenders can use the company's solutions to prepare loan data for industry standard electronic submission to state regulators for examinations. MRG's Miracle Online was certified by ComplianceEase due to its examination data export functionality as well as its integration with ComplianceEase's ComplianceAnalyzer product. This enables the electronic transfer of compliance audits to state regulators. "As the regulatory landscape continues to become more complex, it is vital for lenders to have automated processes in place in order to comply with state and federal regulations," said Laura LaRaia, an attorney and director of customer service at MRG.

Certain deficiencies in the reconciliation process for AH Mortgage Advance Trust 2009-ADV have led Moody's Investors Service to put the servicing advance facility's ratings on watch for possible downgrade. Potentially affected are up to $225 million in securities issued in the deal, which are backed by reimbursement rights for servicing advances that America Home Mortgage Servicing Inc. makes on certain residential mortgage-backed securities. The rating action reflects concerns about "a significant number of aged reconciliation items outstanding" in AHMSI's custodial bank accounts. AHMSI said reporting inconsistencies between two different technology systems are involved and at the time of this writing it had most recently estimated it would be able to fix the problem in four to six months. Reconciliation items, or discrepancies between cash book/loan level records and those shown on monthly bank statements, are "not uncommon," Moody's said. But "servicers will typically resolve such items within 30 days of being identified," the rating agency said. "As items age beyond 30 days or more, the probability that either the servicer or the SAF may suffer a loss increases, although there has been no evidence of this from items cleared to date," Moody's added. In addition to the age and number of the items, the rating agency is concerned that "even as AHMSI has cleared a large number of outstanding items, new reconciliation items have been created."

Jacksonville, Fla.-based LOS MortgageFlex Systems Inc. has formed a strategic alliance with secondary market analytics firm Precision Risk Management Systems Inc. Through this partnership, MortgageFlex customers will gain new financial capabilities, including point-of-sale and delivery of loans into the secondary marketing through a fully managed lender pipeline. Precision Risk also offers what the company calls a "Precision Managed Hedge Service," for lenders who would like to improve their secondary marketing execution and extend their expertise without adding staff.

Lender Processing Services has launched a new short-sale service to help mortgage firms handle their growing caseload of REO properties. The Jacksonville, Fla.-based vendor is offering the service through its Asset Management Solutions division. The company oversees a network of asset managers to market and sell distressed and depository-owned properties. The unit performs such functions as reviewing title, resolving junior liens and reviewing property values against short-sale offers. In other short-sale news, Loan Resolution Corp., Scottsdale, Ariz., said it is hiring 100 new workers this month to meet demand for the Treasury Department's new Home Affordable Foreclosure Alternatives program. LRC says it needs the additional workers to meet "unprecedented growth as demand for short sales and deed-in-lieus skyrockets." The vendor moved into a 30,000-square-foot office in North Scottsdale in September 2009. The new positions range from executive slots down to entry-level positions including asset managers.

First American Corp., Santa Ana, Calif., in preparation for the split of its title and information services businesses into separate publicly traded companies, has named Anand K. Nallathambi as chief executive and Buddy Piszel as chief financial officer of its information solutions group. Mr. Nallathambi, who was appointed president and chief operating officer of the ISG in December, will continue to serve in those capacities. Mr. Piszel will continue to serve as the parent company's chief financial officer. The company's Financial Services Group will commence a search for Mr. Piszel's replacement as its chief financial officer. The target date for the split is June 1. Mr. Nallathambi previously served as chief executive and president of First Advantage Corp., which, until November 2009, was a majority-owned public subsidiary of the company and a business segment within the Information Solutions Group. Mr. Piszel joined the company as chief financial officer in January 2009. Prior to that, he was executive vice president and chief financial officer for Freddie Mac. In a separate announcement, First American said it would purchase the remaining 18% of First American CoreLogic that it does not already own. Parker S. Kennedy, chairman and chief executive of First American, said the purchase of the outstanding shares will simplify the structure as the information solutions group, which First American CoreLogic is a part of, moves toward being spun off. "This acquisition will result in an extra measure of flexibility and operational efficiency that will be beneficial as we develop our next-generation analytic capabilities for the financial services and capital markets industries," he added.

Mortgage vendor Lender Processing Services Inc. is requesting nearly $3 million in city and state incentives to add 350 full-time jobs in Jacksonville, Fla., according to a report in the Jacksonville Business Journal. The city is being considered along with three other areas in the nation for the jobs. The newspaper reported that the publicly traded LPS is requesting the incentives from the Jacksonville Economic Development Commission. If the JEDC recommends it, it will then go to the City Council for approval. The 350 jobs would have an average wage of $44,807 plus $11,202 in benefits, totaling an annual payroll of $15.7 million, according to LPS. "The proposed project will increase the visibility of Jacksonville as a financial services center, further strengthening a targeted industry and continue the redevelopment of downtown Jacksonville," the company said in its application to the JEDC. LPS would hire 175 people by the end of 2010 with the rest coming sometime next year.