Mortgage technology

Fannie Mae is raising its minimum credit score to 620 from 580 and lowering its maximum debt-to-income ratio to 45% to reduce future defaults. These underwriting changes go into effect the weekend of Dec. 12 as part of an update to Desktop Underwriter - Fannie's automated underwriting system. "The adjustments reflect careful analysis of a borrower's ability to repay their mortgage obligation over the life of the loan," said Fannie spokesman Brian Faith. Fannie claims that borrowers with credit scores below 620 are generally nine times more likely to become seriously delinquent than other borrowers. In modifying loans, "we have seen too many borrowers where their other consumer debt has jeopardized their success at homeownership," Mr. Faith said. He noted that none of these changes apply to Fannie's Refi Plus program, which provides a streamlined refinancing option for existing Fannie borrowers that have loan-to-value ratios greater than 80% and up to 125%.

Phoenix-based CCG Catalyst now offers contract negotiation services to financial institutions for vendors such as loan origination systems, servicing and online banking providers. As banks seek ways to cut costs, many are looking to contract negotiations with their existing vendors as a way to streamline operating expenses. In the case of contracts that were signed during prosperous times in the industry, institutions are looking at renewals in regards to their decreased budgets and investigating whether they are receiving enough value from their investment. CCG Catalyst has found significant savings for institutions that enter into early renewal talks with their vendors. The service also helps to assess if an organization has gone too far with concession requests so a vendor no longer views the business as profitable.

CredStar, a credit information provider for credit unions and the mortgage lenders, has been cleared to sell to its customer base the Encore report from First American Credco. Encore, CredStar said, is a consumer reporting solution that delivers Fair Credit Reporting Act-compliant risk analysis for critical elements of the mortgage application and servicing processes. CredStar is also part of the First American family. Encore gives users a "decisionable" view of the consumer and lending transaction, including applicant credit risk, identity verification, applicant income and employment verification, subject property and market data. Encore searches public, private and proprietary data sources covering 99% of the population, over 100 million active loans and more than 600 million consumer data records. A customizable rules-based analysis of the data is provided, along with recommended actions.

Experian, Costa Mesa, Calif., has created a suite of "ability to pay" products for use by mortgage lenders and brokers, among other credit grantors. Ability for a borrower to repay the mortgage loan is one of the hot button topics coming out of the mortgage crisis. The first product, Income Insight, provides an estimate of a borrower's individual income utilizing verified income data and proprietary credit bureau attributes. This product complies with the Fair Credit Reporting Act and the Equal Credit Opportunity Act, Experian said. The company targets customers while considering the complete financial picture, it improves risk-management efforts by including modeled debt-to-income ratios and it aims to accurately segment defaulted borrowers to maximize collection processes. Income View is a Web-based tax verification service that provides clients with what it said is reliable IRS 4506-T processing and prompt access to applicants' verified income via the Internal Revenue Service.

Equifax Inc. has acquired Rapid Reporting Verification Co., a privately held fraud detection firm, for $72.5 million in cash. The publicly traded Equifax said having Rapid Reporting in its stable will enhance its ability to provide lenders with "improved products, quality and services to help them better control fraud." RRVC is a specialist in IRS tax transcript information and social security number authentication services. Based in Fort Worth, Texas, Rapid Reporting products include IncomeChek, which provides IRS verification of income tax information, and DirectChek, which provides Social Security Administration verification of social security numbers and also meets USA Patriot Act compliance requirements.

Tree Inc., which operates the LendingTree.com website, saw its third quarter revenues fall 17% sequentially but was able to add a $75 million warehouse line of credit. The publicly traded mortgage bank/lead generator lost $7.4 million in the third quarter, compared to a slight profit in 2Q. In the year ago quarter it lost $22.6 million. According to its earnings statement, the company was hurt by what it called "unanticipated items" including $4.2 million in loan loss settlement requests and additional legal costs associated with a lawsuit. Even though the company lost money in the period, revenue at its lending operation — its largest segment by that measure — increased 21% from a year earlier, but fell 34% from the previous quarter to $24.1 million. The company said the decrease was primarily driven by higher interest rates, which led to a 31% drop in loan production, to $620.2 million. Its new warehouse lender is JPMorgan Chase & Co.

Technology provider Lender Processing Services, Inc. plans to give servicers more REO management options through its acquisition of the Chicago-based auction company, Rising Tide Auctions. The move will allow LPS, located in Jacksonville, Fla., to help servicers minimize REO timelines and reduce costs through its new component called LPS Auction Solutions. Buyers and investors will now have the ability to purchase individual or multiple bank-owned properties directly from the nation's leading REO disposition service provider. Servicers working with LPS Auction Solutions will benefit from the company's ability to manage all aspects of the auction process from beginning to end, including data collection, property due diligence, open house showings and the auction event, said Chad Neel, president of LPS Asset Management and Field Services. To help ensure timely REO dispositions, LPS utilizes a broker outreach program to encourage broker participation in the auction events. Web-based technology is used to communicate property details to potential buyers, enables the initiation of pre-emptive sales and allows simultaneous online bidding. Reporting functionality keeps servicers informed by providing access to sales metrics, auction day selling data and post-auction escrow information.

Wolters Kluwer Financial Services, Minneapolis has expanded its loss mitigation offering to include state and federal lending compliance consulting services that help servicers avoid discriminatory lending practices when modifying loans. Servicers can use it to ensure they meet all Home Affordable Modification Program fair lending guidelines recently issued by the Treasury Department, according to the company. WKFS said its compliance consultants are available to evaluate existing loan modification policies and procedures and help servicers address fair lending risks, review a sample of completed loan modifications the servicer has completed and denied, and conduct a statistical analysis of all completed modifications to identify modification criteria that might lead the servicer to violate fair lending laws. While modifying loans at risk of default as quickly as possible, servicers also need to make sure everyone is treated fairly and equally in the process, said WKFS senior consultant and statistician Don Morrow. Moreover, regulators are expected to "intensify their scrutiny of servicers' fair lending compliance," he said.

SoundBite Communications, Inc., Bedford, MA, is offering a solution for mortgage servicers participating in the government's Home Affordable Modification Program. The company said its product, the 'SoundBite Making Homes Affordable Accelerator' focuses on four stages in the loan modification process: qualification, processing, trial period and underwriting. The goal is to help mortgage servicers increase the number of modifications started and completed, as well as help improve borrower experience, said Matt Edmunds, vice president of financial services and collections at SoundBite. Multiple channels allow users to collect missing documents, verify information, and send automated reminders about trial modification payments. Proactive communication with qualified borrowers helps lower operating costs by minimizing the need for inbound calls.

UnitedTech Lender Services of California has purchased the assets of LandAmerica OneStop, which includes the company's default services division and a related technology platform called "BackInTheBlack" for an undisclosed sum. The sale comes about a year after LandAmerica Financial Group, the title insurance parent of OneStop, filed for bankruptcy protection in Virginia. Tim Walsh, president of UTLS, said the acquisition would help the company offer integrated default and technology servicing solutions to mortgage bankers. The former LandAmerica business units will be remarketed as UTLS Default Services and UTLS BackInTheBlack.

Kroll Factual Data has released an Independent Verification Solution, which helps lenders comply with the proposed FHA credit policy changes announced on Sept. 18, 2009. Under the proposed guidelines, mortgage brokers will no longer receive independent FHA approval for origination eligibility, but will instead be required to originate through an FHA approved lender. Since FHA approved lenders will carry the liability for broker-originated loans, they need to bolster their verification process to support the additional volume that will come from the correspondent channel, said Loveland, Colo.-based Kroll Factual Data in a prepared statement. Adding to this new strain on scarce underwriting and quality control resources is a new rule for FHA streamlined refinances which requires lender certification of the borrower's capacity to pay at the time of application. Kroll Factual Data will deliver capacity-to-pay verifications. According to Kroll Factual Data, the detailed billing and reporting that is included with the service increases traceability and transparency for Real Estate Settlement Procedures Act compliance. To give lenders an extra measure of protection against the risk of errors, Kroll Factual Data's verifications are backed by representations and warrantees of accuracy. Lenders can customize the solution to include additional types of verifications and risk assessment analytics as required for their specific risk management program.

Specialty servicer Wingspan Portfolio Advisors in Carrollton, Texas, is partnering with National Claims Filing LLC, Irvine, Calif., to automate the handling of claims audits and compliant filings with bankruptcy courts across the country. With bankruptcies rising quickly, the company says lenders and servicers need accuracy in filing the necessary "proof of claim" forms and exhibits in order to protect their rights when borrowers seek bankruptcy protection. Proof of claims are the basic forms used in bankruptcy proceedings that establish the validity of a lender's "standing" in the eyes of the court. Without an accurate and approved POC, a lender's access to proceeds from the sale of their mortgaged property can be denied or delayed, despite the lender's possession of documents signed at the time the loan was originated. National Claims Filing provides an automated POC preparation and risk management system. The system is designed to prepare the POC, attach all supporting documentation, and file the claim with the correct court in accordance with that court's specific filing conventions. Thus far in 2009, Chapter 13 filings rose 10.9% over 2008 levels, while Chapter 7 filings rose by 46.3%. These increases indicate that over two million borrowers will have declared bankruptcy in 2009, potentially representing over $400 billion in mortgage balances, said Wingspan CEO Steve Horne. Prior to this partnership, proofs were mostly done manually at Wingspan, which has 14 clients and specialty services over 7,000 loans at present.

In the latest step in its "green" initiative, Credit Plus Inc., Salisbury, Md., will allow supporting documents for corrections of inaccuracies on credit files to be directly uploaded into its system. In the past, explained Greg Holmes, national director of sales and marketing, this had been more of a manual process, with the documentation faxed or e-mailed in. Now, Credit Plus operates more efficiently, with all the information on one screen. The green initiative started three or four years ago at Credit Plus with e-fax. In June 2008, customers started receiving a one-page invoice with a link to a secure website to review account details. This initiative alone, Credit Plus said, saves 30 reams of paper a month. Mr. Holmes, interviewed at the MBA convention in San Diego, said the company would be rolling out in the next year a new technology that will contribute to a paperless disclosure delivery environment.

eLynx, Cincinnati, has launched an electronic closing network (eCN) service that lenders can integrate into their closing process to increase loan quality and provide more control in order to meet the government's new demands for more accurate closings. The launch, which came at the annual MBA show, is designed to help lenders ensure that borrowers and settlement agents have a better experience at the closing table. The technology firm said a top five U.S. lender/servicer is now using the eCN but did not name the company.

Global DMS, Lansdale, Pa., has unveiled a new technology tool that allows lenders to transfer and receive Home Valuation Code of Conduct compliant appraisals. Announced at the Mortgage Bankers Association convention in San Diego, the tool, AppraisalTransfer.com, is an online portal that hopes to solve the "portability issue" of appraisals, said Global DMS chief operations officer Matt McHale. While it is permissible to transfer appraisals, lenders are reluctant to do so, he said. Even if there is portability it is usually just a transfer between users of the same appraisal management company. With AppraisalTransfer.com the goal, said Mr. McHale, is to allow any lender to have access to the appraisal. (There is no charge to the lender.)

Pointing to a significant rise in income fraud, Rapid Reporting has launched AccountChek, an electronic verification of deposit service that helps lenders, brokers and servicers detect financial account misrepresentations. Unveiled at the MBA show, AccountChek leverages direct access to more than 10,000 financial institutions, including insurance and investment firms, to confirm the accuracy of borrower-provided account information. The company says AccountChek automatically analyzes each account for suspicious activities that could indicate potential mortgage fraud.

The MBA put out a 'request for proposal' to build a national fraud database only to later shelve the idea, but MERSCORP Inc. and Interthinx have moved ahead, deciding the issue is too important to ignore. At the Mortgage Bankers Association's annual convention the pair launched a national fraud prevention database that will allow lenders to seek, identify, and share suspected fraudulent activity on loan applications from the point of origination. The companies said MERS FraudALERT will help identify and prevent fraud through the sharing and reporting of key data among the more than 62 million loans currently registered on the MERS system. Lenders can submit loan application data and incident reports with suspected or confirmed fraudulent activity to a centralized database. The system will then notify other lenders who have connections to the loans, alerting them of possible problems.

Freddie Mac will now accept MISMO Version 3.0 standards around appraisal and loan delivery, joining Fannie Mae, which it said it would earlier this year. Specifically, Freddie has started the planning process for adopting MISMO Version 3.0 for loan delivery. Freddie said it is "exploring a fourth-quarter 2010 implementation date and will communicate additional details about our plans in the near future." The GSE called the migration to an industry-wide data standard "key to supporting a more consistent and efficient mortgage lending process, including streamlining the exchange of loan data among all industry participants." During the transition process Freddie will continue to support the current loan delivery format to provide lenders with time to adopt the new standard. MISMO Version 3.0 is schema-based and offers greater transparency and visibility in every aspect of a given loan.

Griff Straw, a veteran of 30 years in the mortgage banking industry, has joined appraisal management company Solidifi U.S., Chicago, as the company's president. Most recently he was a regional vice president for United Guaranty and prior to joining that company worked for Freddie Mac where he held management roles on several technology-related initiatives. In his new job, Mr. Straw will lead Solidifi as it looks to expand on its valuation services offerings in this country. Solidifi U.S.'s parent company is headquartered in Toronto and has been in business since 2004; in October 2008 it entered the U.S. market.

REOTrans, Los Angeles, is changing its name to Equator in order to facilitate the expansion of its technology solution, which automates and connects the residential default servicing industry. The transition is slated to take place at yearend, according to Chris Saitta, the company's CEO. "The company chose the name to represent its scope and purpose," he said. "The Equator is comprehensive yet precise and a point of change." The technology platform includes a configurable workstation, a marketplace, transactional web site, and a borrower self-service portal. Users of the system currently include 15,000 default vendors and 625,000 real estate agents to manage more than 150,000 transactions daily.