M

a
y


2
0
1
1
Exploring Return on Automation
Private-Label Investors | PPE Advances | Specialty Servicing
mortgagetechnology.com
VS.
Life After
MerS
001_MTMay11 1 5/6/2011 1:22:34 PM
Contents
13 MERS 2.0 vs. Life After MERS
By Austin Kilgore
Changes are coming to MERSCorp Inc and its system of
tracking note ownership. But will it amount to a reboot
or a replacement of MERS?
COVER STORY
22 Back in the Saddle
By Austin Kilgore
Private-label cowboys have returned
to the mortgage secondary, with new
technology to rope in prime investments.
28 Taking Another Swing
By Austin Kilgore
After more than two decades at the GSEs,
E.J. Kite brings his tech know-how to
specialty servicing.
34 All-in-One
By Scott Kersnar
With new features, PPEs are becoming the
Swiss Army knife of mortgage tech.
Features Columns
4 Dont Outsource, Rightsource
By Jon Cleaver
BPO, combined with the right
technology and strategy, can
lead to better results.
8 Broadening Business Skills
By Steve Brothers
Tech-minded executives need
strategic and business know-how
to succeed
10 Market Demand
By Aaron Cope
Why theres still room in the industry for one more LOS.
Inside
3 Editors Note
Its that time againMortgage Technology Awards
nominations are due soon.
8
28
22
Mortgage Technology May 2011
002_MTMay11 1 5/6/2011 1:23:04 PM
Tim Anderson
Lender Processing Services
Brian Boike
Flagstar Bank
Brenda Clem
Equifax
Roger Gudobba
Compliance Systems
Michael Hammond
NexLevel Advisors
Patrick Hartford
Quicken Loans
Kim Weaver
Fiserv
Greg Smith
Xerox Mortgage Services
Scott Stern
Lenders One
David Zugheri
Envoy Mortgage
Its time for the best and the brightest
in mortgage technology to step forward
and be nominated to win one of our
Mortgage Technology Awards.
July 1 is the deadline for entries. Visit
registration.mortgage-technology.com
for more information about the awards.
We have been doing the awards for 12
years now, which shows our dedication to
recognizing the best in technology innovation in the mortgage space.
Judging will be done by myself, managing editor Austin Kilgore
and senior correspondent Scott Kersnar. The awards will be given
out during the Mortgage Bankers Associations annual convention,
which this year is in Chicago Oct. 9-12. Look also for the winners in
a special print edition of Mortgage Technology in October.
We have increased the number of awards to 11 this year and we
are debuting a couple of new ones to keep pace with an intense
amount of industry change.
The Harnessing Mobile Award recognizes the development and
implementation of mobile technology in the mortgage industry.
Weve also added the Online Originator Award to commend a lend-
er with a comprehensive strategy to use Web-based technologies to
generate borrower leads and convert them into closed loans.
Others that you will remember from previous years include the
Servicer of the Year Award, Green Lender Award, Steve Fraser Vi-
sionary Award, Synergy Award, 10X Award, Fix-It Award and the
Release of the Year Award.
Decide which award best fts you, and by all means enter!
Mark Fogarty
Mark.Fogarty@sourcemedia.com
editorsnote

Editorial Director Mark Fogarty 212-803-8226
Managing Editor Austin Kilgore 212-803-8242
Senior Correspondent Scott Kersnar 707-869-0136
Copy Editor Glenn McCullom
Reporters Bonnie Sinnock
Amilda Dymi
Art Director Monica Pizzi
Group Editorial Director, Banking Richard Melville 212-803-8679
VP & Group Publisher Tim Murphy 212-803-8760
Northeast Adv Director Steve Schloss 212-803-8829
Midwest/Southeast Adv Managers John Cahill 773-519-5092
West Adv Managers Mark Majors 312-282-8312
Online Adv Coordinator Justin Nathan 212-803-8671
Marketplace Manager Steve Gallego 212-803-8822
Exec Director of Manufacturing Stacy Ferrara
Production Manager Eugene Moccia
Group Marketing Director Michael OConnor
Fulfllment Manager Douglas Mayer
Distribution Manager Michael Candemeres
Fulfllment Director Tijana Jovanovic
Customer Service 800-221-1809
Reprint Services Denise Petratos
212-803-6557 Fax 212-843-9624
CEO Douglas J. Manoni
CFO Richard Antoneck
EVP and Managing Director, Karl Elken
Banking and Capital Markets
EVP and Managing Director, Bruce Morris
Professional Services and Technology
EVP, Chief Content Ofcer David Longobardi
SVP, Inside Sales & Technology Adam Reinebach
SVP, Conferences John DelMauro
VP, Finance Jamie Brokowsky
Senior Director, Human Resources Ying Wong
SourceMedia, Inc., One State Street Plaza, 27th Floor, New York, NY 10004
TEL: 212-803-8200 FAX: 212-564-8897
Subscription Inquiries: 800-221-1809 or fax 212-803-1592
e-mail addresses use frstname.lastname@sourcemedia.com
Annual Subscription price $89
Canadian: $99 Foreign: $119
Mortgage Technology is available on-line through the following services:
Information Access, 415-378-5000;
Mead Data Central, 513-865-6800;
UMI, 313-761-4700
POSTMASTER: Send address changes to
Mortgage Technology/SourceMedia, Inc. P.O. Box 530 Congers, NY 10920.
MORTGAGE TECHNOLOGY (ISSN1098-4038). Printed fve (5) times a year with issues in February,
March, July, September, and October by SOURCEMEDIA, INC., One State Street Plaza, 27th Floor
New York, NY 10004. Subscription price: $89 per year in the U.S.; $99 in Canada; $119 for all other
countries. To: Periodical postage paid at New York, NY and additional mailing ofces. POSTMASTER:
Send address changes to MORTGAGE TECHNOLOGY/ SOURCEMEDIA, INC., P.O. Box 530 Congers,
NY 10920. For all subscriptions, renewals, address changes or delivery service issues contact our
Customer Service department; email custserv@sourcemedia.com; or
(800) 221-1809 or (212) 803-8333; fax (212) 803-1592; or send correspondence to Customer Service,
MORTGAGE TECHNOLOGY/SOURCEMEDIA, INC., One State Street Plaza, 27th Floor, New York
NY 10004. Send editorial inquires to MORTGAGE TECHNOLOGY, One State Street Plaza, 26th
Floor, New York, NY 10004. MORTGAGE TECHNOLOGY is available online via Information Access
(415-378-5000), Mead Data Central (513-865-6800), and UMI (313-761-4700). For permission to
Reprint Published Materials, call (800) 367-3989 or (212) 803-8367. Those registered with the
Copyright Clearance Center (222 Rosewood Drive, Danvers, MA 01923) have permission to
photocopy articles. The fee is $10 per copy. Copying for other than personal use or internal
use is prohibited without express written permission of the publisher.
2011 Mortgage Technology and SourceMedia, Inc. All rights reserved.
John Walsh
DataQuick
ADVISORy BOARD
Calling All Winners
www.mortgage-technology.com
003_MTMay11 1 5/6/2011 1:22:50 PM
We are operating in an industry characterized by change.
Corporate consolidations and liquidations, combined with lowering margins and
vanilla loan products, have forced mortgage lenders to seek ways to diferentiate
themselves in the market to remain competitive. Regardless of personal feelings on
the topic, one of the primary tools for success in this new environment has clearly
become business process outsourcing.
Traditionally, the term outsourcing simply suggested having a third-party vendor
complete a task for a lower cost than lenders could do it themselves. Over the past
decade, however, the view on outsourcing has matured along with the outsourc-
ing industry itself. The result is a growing appreciation for an enhanced quality of
service being provided through thought leadership and a targeted location strategy
in what is referred to as rightsourcing.
Rightsourcing is the evolution of traditional outsourc-
ing into a true strategic solution that embraces the goals of
the lender, creating a long-term strategic partnership rather
than simply providing a quick-fx, low-cost solution. In a
rightsourcing model, lenders are partnered with seasoned
mortgage professionals with enhanced skill sets within the
industry. A rightsourcing partner functions more like a con-
sultant beginning with a discovery of the driving forces
within the client lender. The objective is to gain an under-
standing of why the lender is seeking a partner in the frst
place. The provider must fully explore specifc pain points
as well as the end objectives in order to create a solution
that enables the lender to fundamentally improve the way
they do business while becoming more efcient.
When lenders consider ways to serve borrowers faster,
how to make lending processes more efcient or how to
achieve more out of their production staf, they should ask themselves a few ques-
tions to help understand how to get the best use of a rightsourcing partner.
Benefts of Rightsourcing
Lenders can look forward to experiencing a number of benefts from partner-
ing with a rightsourcing provider. The most obvious is reducing operational costs
through improved technology or integrated global stafng strategies. In general,
the reduction in costs is about 30% or more over the existing infrastructure. This
can vary dependent upon the provider and specifc scope of an engagement.
TechOUTLOOK by Jon Cleaver
BPO, combined with the right technology
and strategy, can lead to better results.
p
e
R
s
p
e
c
T
i
v
e
s
Dont Outsource, Rightsource
Continued on page
Mortgage Technology May 2011
004_MTMay11 1 5/6/2011 1:22:58 PM
MortgageTechnology.indd 1 4/4/11 12:21:07 PM 005_MTMay11 1 5/9/2011 12:26:49 PM
Also, rightsourcing can yield an op-
portunity to greatly improve
your production delivery
through the expanded hours
of staf availability.
Now the business does not
stop at 5 p.m. A rightsourcing
provider can potentially cre-
ate a 24/7 operating team to
support the business through-
out the night. By adjusting
the availability of employees
both domestically and glob-
ally, loan delivery times can
be drastically reduced while
service levels can be signif-
cantly increased with mini-
mal or no cost to a lender.
Another key advantage
behind utilizing rightsourc-
ing services is that it helps lenders
to utilize their third-party partners as
virtual consultants.
Rightsourcing vendors have di-
verse experiences in mortgage bank-
ing operations. This expertise in best
practices can be leveraged by the
lender on strategic projects to ensure
the best possible business decisions
are being made.
Whether the goal is to improve
turnaround delivery time or cost
measures, or a combination of both,
rightsourcers provide focused advice
and manage the back-ofce fulfll-
ment needs so that the lender can
focus on managing the front-end rev-
enue generation needs.
The Right Partner
Many lenders who have had a bad
experience with outsourcing partners
in the past point to a severe lack of
communication as the culprit.
The wrong way to utilize outsourc-
ing is an environment where the
lender tries to throw a basic need
over a wall and expect the outsourc-
ing vendor to complete it and throw
it back as a fnished product, only
checking in only occasionally to
make sure everything in the opera-
tion is going OK.
The mortgage indus-
try is very fuid and is
rapidly changing. In or-
der to be successful in
outsourcing, the lender
and vendor have to
truly integrate with one
another throughout the
lending process, creat-
ing one cohesive team
working with a shared
strategy to accomplish
a set of goals.
The problem is that
many traditional out-
sourcing vendors fail
to do this in a live pro-
duction environment,
which can result in
signifcant problems for a mortgage
lender thats relying on an outsourcer
to come through for the business.
An important component when
choosing the right partner is to de-
velop a strong governance model.
It is vital to clearly defne how each
party will communicate with each
other, while strategically dividing the
responsibilities based on the expecta-
tions communicated.
In addition, make sure to spend
the time to perform a proper due
diligence and understand who makes
up the leadership.
Is their experience in mortgage
lending focused on actually knowing
the business or are they mortgage
BPO professionals that have focused
solely on transitioning clients into an
outsourcing environment?
Finally, it is critical to inspect the
outsourcing facilities themselves. The
advice is simple: Inspect what you
expect, whether in the United States
or abroad.
This will help validate the claims of
the vendor as well as gain confdence
in their physical capabilities, security
and quality.
What to Consider
First and foremost, lenders must be
open-minded about the prospect of
rightsourcing. We operate in a glob-
al economy, and it will never revert
back to an in-house economy.
As a result, lenders should make
the business decision to research
their strategic options so they maxi-
mize their business potential.
There are a variety of outsourcing
players in the market, so it is crucial
to categorize these players. There are
still the traditional models, or BPO
1.0, that have a mess-for-less strat-
egy from an ofshore facility.
Then there are the thought-leaders
in outsourcing. These are the vendors
that have adapted to meet the needs
of the lending industry and have
evolved to become a BPO 2.0 or
next-generation rightsourcer.
These are the vendors who bring
in the added consultative value into
the process. A rightsourcer can save
money and frustration by providing
targeted expertise and guidance in
implementing and outsourcing strat-
egy to avoid common mistakes.
Bottom linethe mortgage land-
scape is continuing to change and as
lenders attempt to transform them-
selves, rightsourcing has become a
practical solution to accomplishing
such a transformation.
Reviewing the top 50 lenders today
compared to fve years ago, there are
many new names. The high-perform-
ing lenders today are running leaner
and expecting more out of their pro-
duction staf in order to maintain
their competitive edge and keep their
customers satisfed.
This is precisely where the global
strategy behind rightsourcing is tak-
ing of and can enable an organiza-
tion to transform itself to reach new
heights of success.

Jon Cleaver is the practice head of mortgage

business processing outsourcing at Wipro
Gallagher Solutions in Franklin, Tenn.
Rightsourcing
can yield an
opportunity to
greatly
improve your
production
delivery
through the
expanded
hours of staff
availability.
TeChOUTLOOK
Continued from page
Mortgage Technology May 2011
006_MTMay11 2 5/6/2011 1:23:05 PM
007_MTMay11 2 5/9/2011 12:26:44 PM
Mortgage technologists that serve in executive management roles
and have prior business experience provide a strategic advantage to their frms.
To be able to report that behind every well-positioned company in the mortgage
space is a technologist with business acumen would be terrifc. Sadly, that is seldom
the case in this industry.
In large part, their careers have focused exclusively on technology and they have
rarely been involved on the business side, these professionals are focused on a best
practices approach. While that may serve them well for IT initiatives, that course
of action may not always be consistent with the vision and goals of the company.
Often, that works against them.
During the boom times, perhaps frms could get away with this. Oversights could
be fxed, glossed over, technology could be upgraded and the business could still
run with slightly smaller profts, largely unaf-
fected by the missed opportunities.
That is no longer the case.
Today many frms operate leaner, earn less
money for each loan, and they originate or ser-
vice far fewer loans. They need to hold on to
clients and develop better relationships with
them than was necessary in the past to gener-
ate a proft. The right technologist, one with the
skills to help set business strategy and with the
right organizational visibility, can help lay the
foundation for better relationships with clients
and secure more diverse market opportunity to
attract new clients.
However, when technology executives do
not understand the direction the company is
taking or are not involved with setting the strategic objectives, their decisions on
software, hardware or other technology solutions may not be a good ft for the
frm, short term or long term.
In contrast, organizations whose technology leadership has a sophisticated un-
derstanding of the mortgage business are able to steer companies in a direction
to avoid costly mistakes and help the company make strong long-term decisions
about their platforms. They are in a position to do that because they understand
not only the technology and the way it will evolve over several months or years,
but the direction of the company and the mortgage business from a corporate
perspective. That insight helps to set and support the goals of the senior executive
TechOUTLOOK by Steve Brothers
Tech-minded executives need strategic
and business know-how to succeed.
p
e
r
s
p
e
c
T
i
v
e
s
Broadening Business Skills
management team, and ensures that
the needs of the client are neither sac
rifced nor overlooked.
For instance, a technologist that is
shopping for a loan origination sys
tem may purchase one that works for
the lenders needs right now, but not
in the future. He may not be aware
that the frm plans to enter the reverse
mortgage space, so he selects an LOS
that does a stellar job for the forward
market but may not support reverse
mortgage transactions easily.
The system may be able to handle
reverse mortgages, but only after it
has been retroftted to close that gap
a process that tends to be frustrating
to clients, is often difcult to manage,
usually expensive and very frequently
time-consuming.
A technologist needs to understand
the strategic direction of the company
so she can select an LOS that supports
both product lines well.
Working to close an unexpected
technology gap may prevent the frm
from bringing a product to market on
time and under budget, which may
place relationships with clients at risk
unnecessarily. The IT department is
frequently grappling with the chal
lenges of enhancing the technology
rather than enabling future business
opportunities. Avoiding those mis
takes means higher service levels to
the business and that are delivered
more consistently. That means satis
fed clients and increased revenue
over time.
Interestingly relatively few tech
nology executives have those skills
because their backgrounds did not
include working in non-technology
roles for their current or previous em
ployers. Thats because early in their
careers they selected or were placed
on the technology track, where they
learned strictly technology-focused
tasks, such as writing code, admin
istering servers, or fxing networks.
They worked on teams made up of
people with similar backgrounds.
Mortgage Technology May 2011
008_MTMay11 3 5/6/2011 1:23:13 PM
in executive management roles
and have prior business experience provide a strategic advantage to their frms.
To be able to report that behind every well-positioned company in the mortgage
space is a technologist with business acumen would be terrifc. Sadly, that is seldom
In large part, their careers have focused exclusively on technology and they have
rarely been involved on the business side, these professionals are focused on a best
practices approach. While that may serve them well for IT initiatives, that course
of action may not always be consistent with the vision and goals of the company.
During the boom times, perhaps frms could get away with this. Oversights could
be fxed, glossed over, technology could be upgraded and the business could still
run with slightly smaller profts, largely unaf-
fected by the missed opportunities.
Today many frms operate leaner, earn less
money for each loan, and they originate or ser-
vice far fewer loans. They need to hold on to
clients and develop better relationships with
them than was necessary in the past to gener-
ate a proft. The right technologist, one with the
skills to help set business strategy and with the
right organizational visibility, can help lay the
foundation for better relationships with clients
and secure more diverse market opportunity to
However, when technology executives do
not understand the direction the company is
taking or are not involved with setting the strategic objectives, their decisions on
software, hardware or other technology solutions may not be a good ft for the
In contrast, organizations whose technology leadership has a sophisticated un-
derstanding of the mortgage business are able to steer companies in a direction
to avoid costly mistakes and help the company make strong long-term decisions
about their platforms. They are in a position to do that because they understand
not only the technology and the way it will evolve over several months or years,
but the direction of the company and the mortgage business from a corporate
perspective. That insight helps to set and support the goals of the senior executive
TechOUTLOOK
management team, and ensures that
the needs of the client are neither sac-
rifced nor overlooked.
For instance, a technologist that is
shopping for a loan origination sys-
tem may purchase one that works for
the lenders needs right now, but not
in the future. He may not be aware
that the frm plans to enter the reverse
mortgage space, so he selects an LOS
that does a stellar job for the forward
market but may not support reverse
mortgage transactions easily.
The system may be able to handle
reverse mortgages, but only after it
has been retroftted to close that gap
a process that tends to be frustrating
to clients, is often difcult to manage,
usually expensive and very frequently
time-consuming.
A technologist needs to understand
the strategic direction of the company
so she can select an LOS that supports
both product lines well.
Working to close an unexpected
technology gap may prevent the frm
from bringing a product to market on
time and under budget, which may
place relationships with clients at risk
unnecessarily. The IT department is
frequently grappling with the chal-
lenges of enhancing the technology
rather than enabling future business
opportunities. Avoiding those mis-
takes means higher service levels to
the business and that are delivered
more consistently. That means satis-
fed clients and increased revenue
over time.
Interestingly relatively few tech-
nology executives have those skills
because their backgrounds did not
include working in non-technology
roles for their current or previous em-
ployers. Thats because early in their
careers they selected or were placed
on the technology track, where they
learned strictly technology-focused
tasks, such as writing code, admin-
istering servers, or fxing networks.
They worked on teams made up of
people with similar backgrounds.
These technology executives per-
form exceedingly well when assigned
tasks such as implementing systems,
overseeing third-party vendor tech-
nology delivery or managing the help
desk function. That means many think
solely in terms of technology because
they have not been exposed to broad-
er business issues that the company
faces. This is true even for chief infor-
mation ofcers, technically members
of the C-suite, but who have business
backgrounds that are likely more lim-
ited than their peers.
With the resurgence of the market
today and really in any market con-
ditions, having an informed technolo-
gist in an executive role is a competi-
tive advantage.
The decisions that a company
makes to support their lines of busi-
ness and the approaches that they
plan to take require the involvement
of technologists that think like senior
business people. That is especially true
for mortgage frms that want to get to
market faster than their competitors
and command a broader reach in a
market that, to some degree, is rein-
venting itself.
Making these sorts of decisions re-
quires insight from the entire execu-
tive staf; and executing it efectively
requires the skill of a technologist with
business experience. When this type
of CIO goes looking for technology in
the marketplace, she is in a much bet-
ter position to support her company
and its business goals.
One organization in the mortgage
business, for example, built a plat-
form to support broker price opinion
distribution and collection, but then
found that the architecture could not
support the demanding and rapidly
changing requirements of clients.
Simply, the solution portended a stat-
ic data collection approach, but over
time the requests of the client would
have been better supported by a fex-
ible, extensible and confgurable solu-
tion. That disconnect between client
needs and technical implementation
put at signifcant risk the relationship
with their two largest clientsbecause
the changes the clients demanded fre-
quently could not be implemented
quickly enough.
The clients were retained, but be-
cause of the technologists lack of client
exposure, the initial implementation
approach was clearly inadequate; the
cost to fx it was signifcant and the
time required to retroft the system al-
most lost the organization the business.
In this case, the technologist lacked the
diversity of experience to ask the right
questions and the other executives on
the team didnt provide the right infor-
mation up-front. This problem is much
less likely to occur when the CIO is fa-
miliar with business strategy and not
just technical solutions.
Finding a technology executive that
can handle technical details, project
management, software development
teams, infrastructure change, and
business challenges is rare. Most chief
technologists are relegated to purely
technology issues because thats been
the sole focus of their careers. Frankly,
most have been too busy solving tech-
nical problems to stretch out beyond
their discipline. Most CIOs working
in our business today dont have a
well-rounded business background
because of the way that technology
Making these sorts of decisions requires insight from the
entire executive staff; and executing it effectively requires
the skill of a technologist with business experience.
Continued on page 27
www.mortgage-technology.com
009_MTMay11 4 5/6/2011 1:23:15 PM
OriginatiOn sOftware is at a crOssrOads, with no clear leader and
with no clear direction for the future.
The market remains fragmented; no one has emerged as the number one provid-
er, much less as the category killer. Dont misunderstand me. According to market
share statistics, there are leaders. Lenders, bankers and brokers buy the software,
they are simply not that satisfed with the performance of the systems.
There are dozens of loan origination system oferings, and at least as many claims
about what each vendor can accomplish for the lender clients that they hope to lure
to their product. Just how efective these systems are is a cause for debatethough
often providers hide their failures behind non-disclosure-agreements, designed to
closely guard failures or successes.
Buyers are left to fend for themselves.
This has led some to pay hefty fees to consultants,
who cull through the oferings, gather information
and then make a recommendation. Or this has meant,
licensing software, and then sufering through ex-
tended delays and multimillion-dollar cost overruns
that are sometimes gossiped about, but almost never
openly discussed.
Its no surprise therefore, that confusion reigns.
But that means there is an opportunity for the right
player to break through, to distinguish their software,
because it has the right mix of technology, ease of use,
fexibility and customization that lenders crave, but
vendors seem unable to satisfy.
Our team has spent over a year developing a loan
origination system, a demanding task that meant we
speak with lenders, meet with consultants, and study
existing oferings as we bring our product to market.
These systems are ofered in several diferent waysthrough the Internet, of the
shelf and through software-as-a-service models. And they all have one thing in
common: None of them have diferentiated themselves enough to break away from
the competition. The result is a fragmented market.
There are so many players that its tough for people to know who the players are,
much less be able to distinguish among them. At the recent Mortgage Bankers As-
sociation technology show, for instance, one consultant told me he follows 26 loan
origination systems. Thats no easy task.
Why theres still room in the industry
for one more mortgage loan origination system.
p
e
r
s
p
e
c
t
i
v
e
s
Market Demand
Continued on page 12
techOUtLOOK by Aaron Cope
10 Mortgage Technology May 2011
010_MTMay11 5 5/6/2011 1:23:42 PM
011_MTMay11 3 5/9/2011 12:26:58 PM
The result is a confusing array of
oferings and products, some-
times with similar sounding
names, and too often with
similar oferings, that lenders
have to cull through to fnd
the one LOS that is right for
employees and the business.
Some lenders have spent
hundreds of hours determin-
ing the right system, flling
binders and flling cabinets
with the results. Often the re-
sults are less, much less, than
what was expected.
So despite the end of the
real estate bubble, the de-
mise of some of the largest
and most important orga-
nizations in the mortgage
businessthere remains an
opportunity for the right product,
the right company, to break through
with a new origination systemone
that can break the log jam.
Based on our conversations with
lenders and colleagues in the indus-
try over the past several months,
these origination systems are simply
not serving their lenders. Thats be-
cause there are gaps in the oferings
that have to be addressed.
We think the goal is a loan origina-
tion and processing system that can
support community banks, brokers,
credit unions and midsized banks,
which they can deploy seamlessly
from the initial application to the
funding stage of a mortgage.
To begin with, many lenders crave
systems that have a strong tech core,
but also are customizable. They want
to make changes to support their
business.
All too often, the expense of cus-
tomizing a system forces lenders to
change their workfow to accom-
modate the system. That should be
unnecessary, given the abilities of
todays technology.
During the implementation phase,
an LOS provider should work with
the lender to defne their process
based on what was
learned from research
during the projects ini-
tiation phase.
The platform ought
to provide a best prac-
tices solution that can
be customized to meet
those lenders goals.
But heres where
the rubber meets the
road: When a change is
needed shortly before
the launch of the im-
plementation, or even
shortly after, quick and
efcient customization
becomes an absolutely
critical necessity.
Few in the mort-
gage industry would question the
importance of being able to custom-
ize quickly and inexpensively, in re-
sponse to new regulations such as
RESPA and the good-faith estimate.
The ability to customize a system to
meet those changes is the responsi-
bility of the LOS provider, not the
lender. The best providers recognize
this tenet, and developed their soft-
ware in accordance with it.
At the same time, lenders have
little appetite for the fve-step instal-
lation process that many relied on in
the past. This perspective is especially
true for upgrades, which took long
periods of time to install, frequently
extensive training time, and a high
degree of stressespecially the week-
end before a big release.
These installs relied on antiquated
pilot teams, comprised of the best us-
ers in a company, who are assigned
to test the application and ensure
that systems were working well.
The information they gather will be
disseminated to the rest of the staf.
That approach was neither satisfac-
tory, nor sustainable.
As a result, that work has migrated
to the Web, where the training process
and the time to gain familiarity with
the system can be completed. Lend-
ers can establish their production
environments, and they can enable
their users to review implementation
and try it out before its use becomes
mandatory for the operation.
To be sure, lenders require work-
fow, but only if it includes the entire
process and allows them the oppor-
tunity to test drive the implementa-
tion of the application, not just the
origination, or work process pieces.
And we have learned that lenders
have defnite ideas about the features
they are interested in licensing, and en-
suring that their vendors support them,
with the following among others:
The system needs to provide com-
plete coverage of the mortgage loan
lifecycle. That includes the ability to
lock a loan, pick products, track loans
from origination to funding, receive
updates and have easy access to a
history log.
Provides built-in error validations
and confgurable guidelines and busi-
ness rules that the lender only needs
to defne once and then are applied
to all loans by default, or condition-
ally based on logic.
Enables the creation of custom
user roles and access groups and
tracks activities, as well as to create a
user hierarchy based on the organi-
zational structure of the company.
Makes the storing and sharing of
loan documentation straightforward
and supports access to loan fles any-
time, anywhere. The LOS also sup-
ports the ability to add comments to
documents, and it can upload docu-
ments in any format including Word,
PDFs and Excel.
Provides an impressive and easy-
to-use graphical user interface thats
intuitive, easy to use and attractive.

Aaron Cope is head of U.S. operations for

SaM Solutions of Ocala, Fla.
Many lenders
crave systems
that have a
strong tech
core, but
also are
customizable.
They want to
make
changes to
support their
business.
techOUtLOOK
Continued from page 10
12 Mortgage Technology May 2011
012_MTMay11 6 5/6/2011 1:23:25 PM
T
he problems for MERSCorp Inc. began with ques-
tions from the lawyers representing delinquent and
defaulted mortgage borrowers fghting to avoid fore-
closure: Who, or what, is MERS Inc., the company whose
name kept popping up on deeds of trust in the public land
records and in foreclosure lawsuit documents?
Soon others began to echo that questionmunicipal of-
fcials in charge of local land records, attorneys general and
other state ofcials. Even members of Congress began ques-
tioning who was responsible for foreclosing on so many of
the homeowners who had defaulted on their mortgages.
By AusTin Kilgore
Vs. life AfTer Mers
Does the system of tracking note
holders need a reboot or a replacement?
www.mortgage-technology.com 13
013_MTMay11 1 5/6/2011 1:23:35 PM
The answer of course is the Mortgage Electronic Registration
Systems, the brainchild of the government-sponsored enter-
prises and many of the nationals largest mortgage industry
participants, including Bank of America and Wells Fargo.
As the spotlight fell on the MERS System and parent com-
pany MERSCorp, a full-fedged media barrage ensued, with
some suggesting that MERS had surreptitiously replaced
the long-held method of recording mortgage liens in public
records with its own private database.
The legal questions surrounding MERS are numerous
and the answers vary from state to state. While this fght has
raged on, its been largely unclear how much, if anything,
would actually change at Reston, Va.-based MERSCorp. Af-
ter all, both sides in the fght have won court decisions, as
judges compare the actions of MERSCorp to interpretations
of state and federal law. It appeared as if the legality of MERS
would be challenged state-by-state, county-by-county.
Then in April, after federal regulators handed down con-
sent orders to 12 mortgage industry participants, including
MERSCorp, it became clear that change is indeed coming to
MERS. The 22-page decree outlines numerous procedural
reviews and policy changes MERSCorp must make to stay
in compliance with the multi-agency consent order.
What will the new MERS look like? Among the prevailing
theories, two possible scenarios stand out:
MERS 2.0a reboot of the company, complete with a re-
view and overhaul of its policies and procedures.
A second alternative, and an arguably more radical op-
tion, is Life After MERSa world where MERSCorp no lon-
ger exists, forcing the mortgage industry and ofcials from
municipal, state and federal governments to unwind MERS
and move forward with an alternative.
Federal Review Finds Problems
The April 13 consent orders against MERS, 10 fnancial in-
stitutions and the technology and foreclosure services pro-
vider Lender Processing Services came after a multi-agency
review of the foreclosure policies and practices at 14 mort-
gage servicers, MERSCorp and LPS, which was conducted
by the Federal Reserve, the Ofce of the Comptroller of the
Currency and the Ofce of Thrift Supervision.
In its review of MERS, which received the assistance of the
Federal Deposit Insurance Corp. and the Federal Housing Fi-
nance Agency, the agencies found certain defciencies and un-
safe or unsound practices by MERS and MERSCorp that present
fnancial, operational, compliance, legal and reputational risks
to MERSCorp and MERS and to the participating members.
The consent order gives MERSCorp 60 days to address a num-
ber of governance, procedural, policy and oversight issues at the
corporation and its subsidiaries brought to light by the review.
MERSCorp is the parent company that controls a number
of businesses, like Mortgage Electronic Registration Systems
Inc., a wholly owned subsidiary corporation. MERS Inc.
is the entity named on the mortgage documents fled in
municipal land recording ofces owned or serviced by the
5,000 MERS members.
Another component of the corporation is the MERS Sys-
tem, an electronic platform that tracks changes in promissory
note ownership, allowing mortgage investors to bypass the
county-level land recordation process. While possession of
the note may changes hands, MERS remains the listed owner
of the mortgage document that serves as proof in the public
record of the borrowers home as collateral for the note.
In 2007, MERSCorp announced that 50 million loans had
been registered on the MERS System in its nine years of ex-
istence. The precise number of notes currently registered on
the system is unknown, but some estimates put the number
at more than 60 million. In the consent order, the agencies
estimate 31 million notes registered on the MERS System are
loans that are actively being serviced across the country.
In addition to the MERS System, MERSCorp controls a sec-
ond and separate tracking platform called the MERS eRegis-
try, the nationwide system of record to track to ownership,
servicer and document custodian of the more than 207,000
electronic promissory notes since June 2005, along with ad-
ditional business segments. MERSCorp is also responsible
for managing the Mortgage Industry Standards Maintenance
Organization, the nonproft consortium created to promote
data and integration standards in mortgage technology.
Proponents of the MERS System claim the technology
saves time and alleviates workload for county land record-
ing ofces burdened by a paper-intensive process. Critics
claim the process lets mortgage investors avoid paying fees
when promissory notes and mortgages change hands.
When a note is tracked on the MERS System, the MERS
member who owns or services it is relieved of the burden
of fling a transfer and assignment of mortgage if it changes
hands. But the members are contractually obligated to report
all transfers, foreclosures and other changes to the status of
the note and accompanying mortgage to the MERS System.
But the federal review found servicers exercised varying
levels of oversight of the MERS relationship, but none to a
sufcient degree, and said MERSCorp lacks the adequate
internal controls, policies and quality control measures to
ensure servicer compliance with its regulations.
With MERS in control of the publicly recorded mortgages that
are tied to the notes on the MERS System, a legal structure was
created to allow note owners to take action on the mortgages to
execute transfers and assignments to non-MERS members, lien
releases and of increasing regularity, foreclosure documents.
COVERSTORY
14 Mortgage Technology May 2011
014_MTMay11 2 5/6/2011 1:23:35 PM
Success in the mortgage industry doesnt come easily anymore. Todays mortgage bankers need to be at
the top of their game and ready to take advantage of every opportunity. Its why more of the movers and
shakers are shaking things up in their own companies by choosing LendingSpace.
Compliance concerns are one example of where LendingSpace excels. It seems legal requirements change
daily. With LendingSpaces ComplianceOne suite of products, its like having your own dedicated team of
mortgage banking and technology professionals troubleshooting industry concerns and keeping you one
step ahead on every new development.
Created by mortgage bankers for mortgage bankers, LendingSpace is the only system on the market that
works for both forward and reverse mortgage lending, regardless of the origination channel. The systems
continuously updating suite of mortgage technology spans the breadth of loan origination while providing
vital capabilities, like:

Monitor licensing requirements for loan ofcers,

correspondent lenders and brokers

Lead management that allows you to capture and drive

leads from a variety of channels

Lead optimization in a point-of-sale application that provides

superior CRM and deal structuring opportunities

And much more!

When you choose LendingSpace, youve chosen a true enterprise solution that combines origination, pricing,
secondary marketing and all aspects of the loan origination process. Were so condent in your success;
youll only pay for the loans you close!
Call 800-995-2341 for a full capabilities presentation and take the credit
for the best decision your mortgage business will ever make!
Some of the biggest names in the
mortgage industry trust LendingSpace.
What do they know that you dont?
015_MTMay11 4 5/9/2011 12:26:57 PM
Individuals called certifying ofcers are typically ofcers
or lawyers of MERS members who are granted the author-
ity to sign and execute documents on behalf of MERS Inc.
So when Bank of Americaa MERS shareholder with one
of the highest volumes of notes in the systemforecloses on a
borrower, the process is done in the name of MERS Inc., but is
executed by a B of A attorney authorized as a certifying ofcer.
This process allows the note owner to foreclose without
fling an assignment and has been the preferred method of
foreclosure by MERS members, especially in judicial states
where the foreclosure process is exceptionally protracted.
While the review and consent order do not fnd specifc
fault with the certifying ofcer arrangement, MERSCorp was
nonetheless ordered to shore up its procedures for how it
trains, designates and tracks the individuals who are given
this power. As such, MERSCorp will provide the agencies
with a plan to put better controls on who is allowed to serve
as a certifying ofcer.
MERS 2.0
Many of the new policies and changes directed by the
consent order shape the framework of a potential MERS
reboot. But many industry participants believe the changes
required by the consent order amount to MERS Version
1.5an incremental update, rather than a major upgrade.
The federal agencies recognize MERS place as an agent
of its members, including the 14 servicers examined in the
multi-agency review. That agency relationship, as defned
by the United States Code, is the foundation of the federal
agencies jurisdiction to execute the consent order.
But in addition to the U.S. Code, each state has its own
defnition and requirements for agency relationships be-
tween two entities, leading to conficting rulings from courts
deciding challenges to MERS standing in foreclosures.
For example, in the same week of February, federal bank-
ruptcy judges in Kansas and New York issued opposing rul-
ings on MERS status as an agent of its members.
Judge Robert Grossman, of the U.S. Bankruptcy Court for
the Eastern District of New York in Long Island, declared
that the contractual relationship between MERS Inc. and
MERS members is insufcient to allow foreclosures where
MERS Inc. is the foreclosing entity.
But in a similar case, a Kansas federal bankruptcy judge,
Janice Miller Karlin, ruled the same contractual relationship
was sufcient for MERS to act on the servicers behalf.
The diference in the rulings was the judges interpretation of
state agency lawsKarin ruled the agreement created an express
agency relationship, and noted that even if it didnt, it satisfed
the test for an implied agency, which is permitted in Kansas.
Grossmans interpretation of New York law found that
neither the mortgage document nor the MERS membership
agreement it has with members contain the word agency,
and they do not expressly spell out in writing that the ar-
rangement is an agency relationship, which he said is a
critical tenant of New York State contract law.
Judges in other states have handed down decisions on
both sides of the agency question, opening the door for a
state-by-state review of the MERS contracts adherence to
each states agency laws.
To ensure its national viability, MERSCorp may be forced
to amend its contracts with members to refect require-
ments of local laws in states where judges rule MERS and
its members dont have a valid agency relationship.
It would be kind of crazy to think that it didnt pass the
agency requirements initially. I would like to think that the
people who backed and really got MERS up and running,
that between their legal departments and MERS own legal
department, that they felt like they had a viable product,
said Mike Wileman, president and CEO of Orion Financial
Group, a provider of document recording and retrieval ser-
vices based in suburban Dallas.
That kind of surprises me that you have that. But the fact
that you do now have that, it makes sense that they go back
and revisit and fgure out how they make a better agency
agreement with the members in all the states, he added.
Mortgage Technologys request to interview MERSCorp ex-
ecutives and board members was declined. The company
also declined to make other ofcials available to comment
on this story, an all too common practice. Historically, when
court decisions involving MERS are handed downboth for
and against the companyofcials regularly decline inter-
view requests, instead relying on prepared statements to
interact with the public.
Thats their problem. Theyre not being proactive, theyre
being reactive and they really should try and get out there
and try to solve the problem, said Paul Anselmo, CEO of
electronic document preparation vendor SigniaDocs, based
in suburban Dallas. What happens when they hide is it
confrms what everybodys thinking already.
The things that Ive hear bankruptcy and other kinds of
lawyers is that theres this club mentality and its secret and
its owned by the people who are benefting from it and by
the people who are foreclosing on widows and orphans,
Anselmo added, noting there is minimal public informa-
tion about the fnances of MERSCorp. From a perception
standpoint, it looks like they made all kinds of money at
our expenses; Im losing my house and here these guys are
smoking cigars with $100 bills.
COVERSTORY
Anselmo believes that if MERSCorp were made a publicly
traded company, or at a minimum began disclosing fnan
cial information in the same manner as public companies,
public confdence in the company could be restored.
Foreclosing in the Name of MERS
Among the complaints against the MERS System, its role
as the named entity in foreclosure lawsuits is the source of
some of the loudest criticism.
Like the agency issue, rulings have come down for and
against MERS in diferent states. And in some states, courts
have issued split decisions.
In late April, the Michigan Court of Appeals ruled MERS
Inc. is ineligible to use the states nonjudicial foreclosure
process. Michigan law specifes that in order to use its ex
pedited nonjudicial process, the foreclosing entity must be
either the owner of the indebtedness or of an interest in
the indebtedness secured by the mortgage or the servicing
agent of the mortgage.
The decision vacated the 2009 foreclosure and eviction
of two borrowers, but the court noted that had MERS Inc.
fled an assignment transferring mortgage ownership to the
notes custodians prior to the foreclosure sales, the cases
would have stood.
Additionally, MERS Inc. and the custodians could have
fled a judicial foreclosure without recording the assign
ment and also successfully executed the foreclosures.
The note owner plaintifs in the two foreclosures that the
court ruled on tried to invoke whats commonly known as
the MERS statute, a Minnesota Supreme Court ruling from
2009 that upheld MERS ability to initiate nonjudicial fore
closures in that state. But the Michigan appeals court reject
ed the argument, noting the Minnesota law is substantially
diferent from Michigans statute.
The court opinion notes that MERS seeks to blur the lines
between itself and the lenders in this case in order to posi
tion itself as a party that may take advantage of the restrict
ed tool of foreclosure by advertisement, but in other cases
MERS has sought to clearly defne those lines in order to
avoid the responsibilities that come with being a lender.
The court cited a 2005 case in which MERS successfully
defended itself against claims by the Nebraska Department
of Banking and Finance that MERS meets the states defni
tion of a mortgage banker and is subject to licensing and
registration requirements.
The Nebraska court accepted the MERS argument that it
is not a lender, and rather merely a shell designed to make
buying and selling of loans easier and faster by disconnect
ing the mortgage from the loan, the Michigan court wrote.
16 Mortgage Technology May 2011
016_MTMay11 3 5/6/2011 1:23:45 PM
Grossmans interpretation of New York law found that
neither the mortgage document nor the MERS membership
agreement it has with members contain the word agency,
and they do not expressly spell out in writing that the ar-
rangement is an agency relationship, which he said is a
Judges in other states have handed down decisions on
both sides of the agency question, opening the door for a
state-by-state review of the MERS contracts adherence to
To ensure its national viability, MERSCorp may be forced
to amend its contracts with members to refect require-
ments of local laws in states where judges rule MERS and
its members dont have a valid agency relationship.
It would be kind of crazy to think that it didnt pass the
agency requirements initially. I would like to think that the
people who backed and really got MERS up and running,
that between their legal departments and MERS own legal
department, that they felt like they had a viable product,
said Mike Wileman, president and CEO of Orion Financial
Group, a provider of document recording and retrieval ser-
That kind of surprises me that you have that. But the fact
that you do now have that, it makes sense that they go back
and revisit and fgure out how they make a better agency
agreement with the members in all the states, he added.
s request to interview MERSCorp ex-
ecutives and board members was declined. The company
also declined to make other ofcials available to comment
on this story, an all too common practice. Historically, when
court decisions involving MERS are handed downboth for
and against the companyofcials regularly decline inter-
view requests, instead relying on prepared statements to
Thats their problem. Theyre not being proactive, theyre
being reactive and they really should try and get out there
and try to solve the problem, said Paul Anselmo, CEO of
electronic document preparation vendor SigniaDocs, based
in suburban Dallas. What happens when they hide is it
The things that Ive hear bankruptcy and other kinds of
lawyers is that theres this club mentality and its secret and
its owned by the people who are benefting from it and by
the people who are foreclosing on widows and orphans,
Anselmo added, noting there is minimal public informa-
tion about the fnances of MERSCorp. From a perception
standpoint, it looks like they made all kinds of money at
our expenses; Im losing my house and here these guys are
COVERSTORY
Anselmo believes that if MERSCorp were made a publicly
traded company, or at a minimum began disclosing fnan-
cial information in the same manner as public companies,
public confdence in the company could be restored.
Foreclosing in the Name of MERS
Among the complaints against the MERS System, its role
as the named entity in foreclosure lawsuits is the source of
some of the loudest criticism.
Like the agency issue, rulings have come down for and
against MERS in diferent states. And in some states, courts
have issued split decisions.
In late April, the Michigan Court of Appeals ruled MERS
Inc. is ineligible to use the states nonjudicial foreclosure
process. Michigan law specifes that in order to use its ex-
pedited nonjudicial process, the foreclosing entity must be
either the owner of the indebtedness or of an interest in
the indebtedness secured by the mortgage or the servicing
agent of the mortgage.
The decision vacated the 2009 foreclosure and eviction
of two borrowers, but the court noted that had MERS Inc.
fled an assignment transferring mortgage ownership to the
notes custodians prior to the foreclosure sales, the cases
would have stood.
Additionally, MERS Inc. and the custodians could have
fled a judicial foreclosure without recording the assign-
ment and also successfully executed the foreclosures.
The note owner plaintifs in the two foreclosures that the
court ruled on tried to invoke whats commonly known as
the MERS statute, a Minnesota Supreme Court ruling from
2009 that upheld MERS ability to initiate nonjudicial fore-
closures in that state. But the Michigan appeals court reject-
ed the argument, noting the Minnesota law is substantially
diferent from Michigans statute.
The court opinion notes that MERS seeks to blur the lines
between itself and the lenders in this case in order to posi-
tion itself as a party that may take advantage of the restrict-
ed tool of foreclosure by advertisement, but in other cases
MERS has sought to clearly defne those lines in order to
avoid the responsibilities that come with being a lender.
The court cited a 2005 case in which MERS successfully
defended itself against claims by the Nebraska Department
of Banking and Finance that MERS meets the states defni-
tion of a mortgage banker and is subject to licensing and
registration requirements.
The Nebraska court accepted the MERS argument that it
is not a lender, and rather merely a shell designed to make
buying and selling of loans easier and faster by disconnect-
ing the mortgage from the loan, the Michigan court wrote.
Having separated the mortgage from the loan, and dis-
claimed any interest in the loan in order to avoid the le-
gal responsibilities of a lender, MERS nevertheless claims
in the instant case that it can employ the rights of a lender
by foreclosing in a manner that the statute afords only to
those mortgagees who also own an interest in the loan, the
opinion said.
The easiest solution to the foreclosure fling challenges is
to assign the mortgage out of the name of MERS Inc. and
into the name of the appropriate MERS member prior to
fling foreclosure documents. There is an expense to that
extra step, in both time and money, but Wileman estimates
that the average cost to fle an assignment is $25, with some
recording ofces charging less than $10 and others charging
closer to $100 to fle the appropriate paperwork.
In December 2006, Fannie Mae took that very step, requir-
ing its servicers to fle an assignment of the mortgage out
of MERS name prior to initiating a judicial foreclosure. In
April 2011, Freddie Mac enacted a similar directive for its
servicers. And now, MERSCorp ofcials wants the practice
of foreclosing in the name of MERS Inc. to stop entirely.
In March, MERSCorp proposed a rule change that would
require servicers assign the mortgage to the name of the fore-
closing entity. The rule is currently pending a 90-day com-
ment period that will end in June, during which time MERS
requested that its members do not foreclose in its name.
If a member chooses to foreclose in MERS name during the
comment period, it must give MERSCorp two weeks advance
notice to permit verifcation of the appointment and current
status of the certifying ofcer who will participate in the foreclo-
sure. If the proposal is enacted, the MERS board of directors will
have to frst approve it and set a start date for the new policy.
I dont know if its an improvement to MERS, but rath-
er an improvement to the overall process. It does provide
some consistency, Wileman said.
Anselmo agrees. If that had been done all along, we wouldnt
have these issues. It would have put the current holder of the
notes name on the endorsement chain, which would have
eliminated the whole Who the hell is MERS question. They
would have just been another name in the chain, he said.
But he said even before foreclosure, MERSCorp should go
a step further. My thought always was the deed should have
been recorded in the lenders name and one assignment done
into MERS simultaneously when you record the mortgage.
Anselmo believes that process would strengthen the chain
of title on MERS mortgages. Right now, the initial deed is fled
in MERS Inc.s name, but the note is executed in the lenders
name. If you have the lender on both the note and deed ini-
tially, then youve eliminated that argument, he said.
www.mortgage-technology.com 17
017_MTMay11 4 5/6/2011 1:23:50 PM
Whats in a Name?
The damage to MERSCorp may already be too severe
for the company to continue to operate with its existing
brands. Wileman said the damage to the MERS brand is
not unlike the trouble ValuJet Airlines faced after one of
its planes crashed in the Florida Everglades in 1996, lead-
ing to the Federal Aviation Administration grounding the
Georgia-based regional airline. A year later, the company
restructured with a new name, AirTran.
A lot of people didnt even know that it was the same
airline. That name just got such a terrible negative conno-
tation, that they came back with another name, Wileman
said. You might see the same thing with MERS.
Its unclear whether a rebranded MERSalong with suf-
cient changes and modifcations brought by the consent or-
der and MERSCorps self-imposed policieswill be enough
to salvage MERSCorp from the onslaught its faced during
the foreclosure crisis. But should MERSCorp cease to exist,
many other issues emerge.
Life After MERS
If MERSCorp were to close up shopeither at the hand of
regulators or by its members adopting alternative methods
to record and track note and mortgage ownershipnewly
originated mortgages would have their deeds recorded in
municipal land records in the name of the servicer or note
owner, and each time the note changed hands, the new own-
er would have to fle a new assignment.
In the current period of lower origination volume and
sluggish secondary market activity, its possible that munici-
pal recording ofces could build up their capacity to handle
the infux of transfers.
But the more daunting task would be the systematic
wind-down of the MERS System. While many delinquent
mortgages will fall out of the system and county records
as servicers and investors continue to clear the clog in the
foreclosure pipeline. In addition to that, youve got 30-year
notes sitting out there and MERS would still need to func-
tion until the very last one is gone, Anselmo said.
One option would be to fle transfer assignments from
MERS Inc. to the name of the appropriate note holder, but
its a daunting task, Anselmo said.
Youd have to review all the agreements to determine
do you just put it back to the servicer and believe that the
MERS data is right. Its an enormous undertaking that would
be extremely costly. Whos going to pay for it?
The task of processing the assignments would fall on the
more than 3,000 counties and equivalent municipal districts
across the country who maintain property records.
But winding down the MERS System would add yet another
task for servicers already strained by loss mitigation eforts and
foreclosure responsibilities brought on by the housing crisis.
John OBrien Jr., register of deeds for the Southern Essex
District Registry of Deeds in northeastern Massachusetts, is a
staunch MERS opponent and would like nothing more than
to see the MERS System dismantled.
I dont think you need MERS, Id put them out of business
and life will go on and people will be much better of, he said.
OBrien is a public ofcial who heads one of the 13 reg-
istries in Massachusetts that are run by the commonwealth
(the states other eight registries are run by counties). He is
elected by voters in the 30 surrounding cities and towns for
six-year terms and has held his position since 1977.
The registry claims it is owed $22 million in lost revenue
from mortgage assignment transfers that were not recorded
because MERS was listed as the mortgagee in public land
records. In protest of Bank of Americas afliation with
MERSCorp, OBrien recently requested the Massachusetts
Treasurer switch the registrys bank account out of B of A.
Its very simple how to solve it. Go ahead and draw up all
the assignments for every time you sold someone a mort-
gage, come in here and record them, clean up all these phony
signatures you have, rerecord everything and pay the fees
like everyone else and never do this again, OBrien said.
But Anselmo said its not that simple. Drawing on his ex-
perience in the pre-MERS days, when he was involved with
mass assignment transfers for servicers taking over new
loan portfolios, including the transfer of 750,000 loans from
Lomas Mortgage to First Nationwide in the early 1990s.
The counties would not be ready to take the onslaught
of volume to put it where it belongs, even after you fgure
out where it does belong, which would be very costly, An-
selmo said. And youve got to it right or youve got a worst
problem than today.
One of the biggest challenges to recording deeds and
transfer assignments is that each registry has diferent re-
quirements. When the documents are not completed cor-
rectly, they get rejected. Companies like Wilemans Orion
Financial Group maintain databases and a technology plat-
form to manage those various nuances. On top of having
the correct requirements and forms, servicers would need
reporting and tracking technology to follow the status of
pending assignments.
If youre trying to do it on your own from scratch, abso-
lutely it would be expensive, Wileman said. I look at our
own proprietary system that we built and have continually
enhanced over the past 15 years. Theres an extreme amount
of money tied into that.
COVERSTORY
E-Recording Tech
Early MERS proponents argued that land recording ofces
lacked the technology to keep pace with the demand of new
assignments coming out of the age of mortgage securitiza
tion. There was defnitely a housing policy that said we want
housing. In order to get liquidity in the market, you needed
the velocity that securitization could get you, Anselmo said.
It was just efcient. If you look at how green it iswe
reduced FedEx charges and any kind of movement, which
is gas and pollution, he continued. We saved a ton of trees
by not producing the paper the counties require. For Gods
sake, its 2011, why are we not doing it electronically?
Indeed, many counties have adopted a combination of
imaging and databasing of paper assignments and full elec
tronic documentation and signature capabilities to increase
the efciency of their operation.
Weve seen counties that eight or nine years ago, it would
take them 90 to 180 days to record a document, Wileman said.
In some of those counties, they go to electronic recording, and
boom all of a sudden, once you get the initial kinks worked
out, you get documents recorded within a couple of hours.
Wileman estimates that 80% of the land recording volume
is handled by 20% of the nations registries, many of whom
already have e-recording technology in place. If MERS Inc.
no longer served as mortgagee, they could handle the in
fux when its being done electronically, Wileman believes.
A consensus among Anselmo, OBrien and Wileman is that
the typical note will change ownership two to four times over
the life of the loan. Aside from the initial fling of the deed,
the MERS System eliminates the additional assignment trans
fers that were fled before the technology was in place.
I honestly believe the registries of deeds in this country
are capable of handling all of the assignments and discharg
es from any bank, whether its MERS related or not, OBrien
said. And I would stake my reputation on that.
OBrien estimates that MERS Inc. is the mortgagee on 160,000
of the 500,000 active mortgages on record in the Southern Es
sex Registry and projects eliminating MERS would result in a
25% increase in assignment recording activity.
If they came in and recorded two assignments on av
erage to clean up the mess that theyve created, we could
handle that in no time, he said.
In 1998, OBriens registry launched its custom-built docu
ment management platform and Web-based portal that it
has developed and maintained itself. Documents are im
aged and databased before theyre posted to the registrys
searchable online records. The registry is also in the process
of establishing e-recording capabilities to further its techno
logical capabilities.
18 Mortgage Technology May 2011
018_MTMay11 5 5/6/2011 1:23:55 PM
But winding down the MERS System would add yet another
task for servicers already strained by loss mitigation eforts and
foreclosure responsibilities brought on by the housing crisis.
John OBrien Jr., register of deeds for the Southern Essex
District Registry of Deeds in northeastern Massachusetts, is a
staunch MERS opponent and would like nothing more than
I dont think you need MERS, Id put them out of business
and life will go on and people will be much better of, he said.
OBrien is a public ofcial who heads one of the 13 reg-
istries in Massachusetts that are run by the commonwealth
(the states other eight registries are run by counties). He is
elected by voters in the 30 surrounding cities and towns for
six-year terms and has held his position since 1977.
The registry claims it is owed $22 million in lost revenue
from mortgage assignment transfers that were not recorded
because MERS was listed as the mortgagee in public land
records. In protest of Bank of Americas afliation with
MERSCorp, OBrien recently requested the Massachusetts
Treasurer switch the registrys bank account out of B of A.
Its very simple how to solve it. Go ahead and draw up all
the assignments for every time you sold someone a mort-
gage, come in here and record them, clean up all these phony
signatures you have, rerecord everything and pay the fees
like everyone else and never do this again, OBrien said.
But Anselmo said its not that simple. Drawing on his ex-
perience in the pre-MERS days, when he was involved with
mass assignment transfers for servicers taking over new
loan portfolios, including the transfer of 750,000 loans from
Lomas Mortgage to First Nationwide in the early 1990s.
The counties would not be ready to take the onslaught
of volume to put it where it belongs, even after you fgure
out where it does belong, which would be very costly, An-
selmo said. And youve got to it right or youve got a worst
One of the biggest challenges to recording deeds and
transfer assignments is that each registry has diferent re-
quirements. When the documents are not completed cor-
rectly, they get rejected. Companies like Wilemans Orion
Financial Group maintain databases and a technology plat-
form to manage those various nuances. On top of having
the correct requirements and forms, servicers would need
reporting and tracking technology to follow the status of
If youre trying to do it on your own from scratch, abso-
lutely it would be expensive, Wileman said. I look at our
own proprietary system that we built and have continually
enhanced over the past 15 years. Theres an extreme amount
COVERSTORY
E-Recording Tech
Early MERS proponents argued that land recording ofces
lacked the technology to keep pace with the demand of new
assignments coming out of the age of mortgage securitiza-
tion. There was defnitely a housing policy that said we want
housing. In order to get liquidity in the market, you needed
the velocity that securitization could get you, Anselmo said.
It was just efcient. If you look at how green it iswe
reduced FedEx charges and any kind of movement, which
is gas and pollution, he continued. We saved a ton of trees
by not producing the paper the counties require. For Gods
sake, its 2011, why are we not doing it electronically?
Indeed, many counties have adopted a combination of
imaging and databasing of paper assignments and full elec-
tronic documentation and signature capabilities to increase
the efciency of their operation.
Weve seen counties that eight or nine years ago, it would
take them 90 to 180 days to record a document, Wileman said.
In some of those counties, they go to electronic recording, and
boom all of a sudden, once you get the initial kinks worked
out, you get documents recorded within a couple of hours.
Wileman estimates that 80% of the land recording volume
is handled by 20% of the nations registries, many of whom
already have e-recording technology in place. If MERS Inc.
no longer served as mortgagee, they could handle the in-
fux when its being done electronically, Wileman believes.
A consensus among Anselmo, OBrien and Wileman is that
the typical note will change ownership two to four times over
the life of the loan. Aside from the initial fling of the deed,
the MERS System eliminates the additional assignment trans-
fers that were fled before the technology was in place.
I honestly believe the registries of deeds in this country
are capable of handling all of the assignments and discharg-
es from any bank, whether its MERS related or not, OBrien
said. And I would stake my reputation on that.
OBrien estimates that MERS Inc. is the mortgagee on 160,000
of the 500,000 active mortgages on record in the Southern Es-
sex Registry and projects eliminating MERS would result in a
25% increase in assignment recording activity.
If they came in and recorded two assignments on av-
erage to clean up the mess that theyve created, we could
handle that in no time, he said.
In 1998, OBriens registry launched its custom-built docu-
ment management platform and Web-based portal that it
has developed and maintained itself. Documents are im-
aged and databased before theyre posted to the registrys
searchable online records. The registry is also in the process
of establishing e-recording capabilities to further its techno-
logical capabilities.
OBrien said it cost approximately $200,000 to build and
maintain the system. In 1999, the registry was the recipient
of a Smithsonian ComputerWorld Award recognizing its ef-
forts in promoting information technology innovation.
By September, OBrien said the registrys website will al-
low users to view every plan, deed and record collected dat-
ing back to the regions founding in the 1600s.
While Southern Essex is a marked example of a techno-
logically progressive registry, OBrien dismisses the notion
that his fellow registries arent sophisticated.
MERS went along and said the registries are back in the
Dickens days. Theyve got quill pens, theyve got oil lamps,
their computer systems cant handle this. Thats all baloney, he
said. We can do anything MERS can do 100 times better.
Another Option
The potential reboot in MERS 2.0 or MERSCorps demise at
the hands of replacement by county e-recording arent the only
two options for the future of MERS. Among other scenarios, a
third outcome exists that would still leave MERS obsolete, but
potentially improve efciency in the recording process.
In the states where courts have afrmed MERS ability to
represent its members as mortgagee in public land records,
the company has clearly found a way to operate within the
parameters of the law. In states that only require new as-
signments when there is a new mortgagee on record, as well
as states that do not require assignments at all, the legisla-
tion overlooks a change in note ownership.
If government bodies want to limit the ability of MERS to
represent its members on land records, legislative changes
could specifcally mandate that assignments get fled when
either the note or mortgage changes hands.
Such a legislative change would require nationwide
adoption to render MERS obsolete. And in a world without
MERS, it would be difcult for the mortgage industry to
keep track of the myriad recording requirements of each
registrycreating a demand for more consistency and elec-
tronic processing in land recording.
Similar to the way that states have specifc licensing re-
quirements for loan ofcers yet collaborate in participation
on the Nationwide Mortgage Licensing System and Registry,
theres an opportunity for land recorders to embark on a
coordinated efort to bring more standardization to the re-
cordation process.
The federal consent order placed on MERS wont put to
rest the debate of MERSCorps place in the mortgage indus-
try and land registries. Its a complex issue that will take ac-
tive participation and engagement by all involved parties to
promote the most sound policies and procedures.

www.mortgage-technology.com 19
019_MTMay11 6 5/6/2011 1:24:01 PM
P
h
o
t
o
g
r
a
p
h
y

B
y

M
e
d
i
a

B
a
k
e
r
y
Private-label cowboys have returned to
the mortgage secondary, with new
technology to rope in prime investments.
W
hen Redwood Trust began
structuring a private-label
mortgage-backed security
comprised of $238 million in jumbo
mortgages in the spring of 2010, the
mortgage real estate investment trust was
creating the frst private-label MBS deal
in the 18 months following the collapse
of the housing fnance industry.
A year later, and only one other private-
label MBS has come to marketanother
$290 million jumbo mortgage MBS,
again issued by Redwood.
But the lack of new securitizations does
not mean that private and institutional in-
vestors are no longer participating in the
mortgage secondary. While volume is still
slow, these investors are coming back.
Like the cowboys of the Old West, the
investors exploring the market are chart-
ing new territory and their activity is not
without risk. Te skilled cattleman relies
on his lariat and trusty steed. Te private
market investors has technology, data
and analytics to lasso the proft potential
from this new frontier.
By Austin Kilgore
BAcK
in the
SAddle
An emerging trend in the private
secondary market is a new interest in
whole loan trading. The buying and
selling of mortgages not packaged in
MBS deals is nothing new and is many
times referred to as the hard-money
market. Pockets of brokers and deal-
ers around the country have created
a vibrant business out of fnding and
delivering deals ranging from indi-
vidual commercial and nonconform-
ing residential loans to large portfolios
of mortgages to high net worth indi-
viduals and institutional investors like
hedge funds.
The hard-money market has
evolved with the times, explained Bri-
an OShaughnessy, the CEO of Athas
Capital Group and president of Rama
Capital Partners, both based in Cala-
basas, Calif. OShaughnessys career in
hard-money lending spans 25 years at
a variety of frms.
Hard-money lenders in 2007 typi-
cally funded deals with sub-500 FICO
scores, the deals Wall Street wouldnt
take, OShaughnessy explained. Our
average LTV was 50%. Our average
loan was a foreclosure bailout; the
worst of the worst and they paid a
higher interest rate and got a second
chance at a fresh start.
Now days its much diferent. Banks
arent lending, theyre turning down
everybody, OShaughnessy contin-
ued, noting that in 2007, the average
Fair Isaac credit score of loans in his
servicing portfolio was 492. Now, that
score is up to 698.
We are funding bank fallout. Theres
a huge chasm between the banks pro-
gram and ours, but theres nothing in
between because theres no secondary
market, he said.
The hard-money sector has histori-
cally faced a number of challenges as
lenders and investors seek to grow
their books of business and reach
more mainstream acceptance.
Many of the hard-money brokers are
mom and pop shops, producing only
a handful of loans, OShaughnessy said.
They rely on their network of con-
tacts and referrals to connect with in-
vestors, limiting their individual reach.
Many times, hard-money lenders use
warehouse lines of credit to build a
portfolio of loans to sell to investors.
The San Diego-based online loan
marketplace LoanMLS launched in June
2009. Since then, its registered more
than 9,000 brokers and investors who
can search listings of mortgages deals
looking for funding, similar to the way
prospective homebuyers search from
home listings on a property multiple
listing service. Listings are also opti-
mized to come up in search engine re-
sults, driving more people to the site.
There are a surprising number of
similarities between buying a home
and a loan, said Martin Goodman,
president and founder of LoanMLS.
Everybody knows how to buy a home.
You write an ofer, do an inspection,
its in escrow, you put down a deposit,
the inspection clears, the contingency
is waived and title is transferred. Its re-
ally the exact same thing with a loan.
LoanMLS users register on the site
to view and post loan listings. Good-
man estimates 40% of users are indi-
vidual investors, 30% business-type
investors like hedge funds or people
who have put together funds, and the
remaining 30% are brokers/lenders
like OShaughnessys Athas and Rama
hard money businesses.
A broker posting a loan can describe
it pre-closing, bringing investors into
the deal earlier in the process.
If you can go out in the marketplace
and fnd lots of diferent people and
get your participants as youre putting
the loan together, you can have some
give and take between the borrower
and the investor, Goodman said. You
may fnd you have to structure the
loan a little diferently or theyre look-
ing for a slightly diferent twist on the
type of loan you want to do.
Its not a bidding process, but more
of a conversation, he added.
In addition to posting loan details, both
investors and brokers can set parameters
for the types of participants they want to
work with. By vetting potential deal part-
ners before the transaction even begins,
saving time and efort chasing deals that
arent likely to succeed.
How serious they have to be is
really depending on the size of the
note and the size of the participation,
Goodman explained. If Im looking
for $100,000 on a $500,000 small ofce
building commercial note, the vetting
doesnt have to be that serious. If Im
looking at a $25 million hotel note,
thats a whole diferent ball game.
On the other side of the equation,
brokers can post due diligence reports
for loan listings so investors can have
more reassurance about a deals au-
thenticity and its associated risk level.
The vetting process is always chal-
lenging, which is probably why the
market does business with who theyve
done business with, which leaves out a
lot of players, Goodman said. Users set
their own prequalifcation questions so
they can do business with people they
are comfortable with.
As more participants engage with
each other on LoanMLS, Goodman
said another trend is developinga
micro channel of brokers seeking in-
vestors to table fund new originations.
While the majority of new originations
posted on LoanMLS have already been
funded and closed, Goodman said the
speed that participants can engage on
the website will spur new ways of do-
ing business like the table funding.
At any one time, there are a couple
of hundred listings on the system. The
goal is to increase that count of list
ings to the thousands in the next year,
which will help with another goal, lur
ing big money institutional investors
to the platform.
With the lack of private MBS of
ferings, some institutional investors
have begun trading scratch and dent
portfoliospools of loans with a mix
of performing, nonperforming and de
faulted loans, and sometimes includ
ing real estate owned properties.
Together, these loans are worth one
price, but split up, the performing
pieces can be sold at a higher proft.
Even notes in the bad loan pool can
be divvied up, with scratch loans
fetching more than the more damaged
or dented ones.
Robert Hodes, LoanMLS director of
institutional accounts, said many insti
tutional investors are fnding opportu
nities listing those portfolios of loans
on the website, while at the same time
connecting and building relationships
with hard-money players for potential
deals in the future.
The reaction is mixed. In certain
cases, people get it right away and go
and use the system, Hodes said. In
other cases, its really a new business
model and even thinking about using
the Internet to put up loans theyre in
teresting in selling is a little bit foreign.
So it takes some educating.
OShaughnessy believes as more in
stitutional types begin exploring alter
native investments like hard-money
deals and the LoanMLS marketplace,
theyll like what they see. But itll take
changing some perceptions about the
ways private players can participate in
mortgage investing.
Institutional investors havent fg
ured it out yet; they dont get our
space. Institutional investors are used
to getting a loan at 80% to 90% LTV
with a perfect credit score and great
income and accepting a yield of 3% or
4% on their bond, he said.
Theres a huge chasm
between the banks
program and ours, but
theres nothing in
between because theres
no secondary market.
Brian OShaughnessy, Athas Capital
24 Mortgage Technology May 2011
024_MTMay11 3 5/6/2011 1:24:10 PM
If you can go out in the marketplace
and fnd lots of diferent people and
get your participants as youre putting
the loan together, you can have some
give and take between the borrower
and the investor, Goodman said. You
may fnd you have to structure the
loan a little diferently or theyre look-
ing for a slightly diferent twist on the
type of loan you want to do.
Its not a bidding process, but more
of a conversation, he added.
In addition to posting loan details, both
investors and brokers can set parameters
for the types of participants they want to
work with. By vetting potential deal part-
ners before the transaction even begins,
saving time and efort chasing deals that
How serious they have to be is
really depending on the size of the
note and the size of the participation,
Goodman explained. If Im looking
for $100,000 on a $500,000 small ofce
building commercial note, the vetting
doesnt have to be that serious. If Im
looking at a $25 million hotel note,
thats a whole diferent ball game.
On the other side of the equation,
brokers can post due diligence reports
for loan listings so investors can have
more reassurance about a deals au-
thenticity and its associated risk level.
The vetting process is always chal-
lenging, which is probably why the
market does business with who theyve
done business with, which leaves out a
lot of players, Goodman said. Users set
their own prequalifcation questions so
they can do business with people they
As more participants engage with
each other on LoanMLS, Goodman
said another trend is developinga
micro channel of brokers seeking in-
vestors to table fund new originations.
While the majority of new originations
posted on LoanMLS have already been
funded and closed, Goodman said the
speed that participants can engage on
the website will spur new ways of do-
ing business like the table funding.
At any one time, there are a couple
of hundred listings on the system. The
goal is to increase that count of list-
ings to the thousands in the next year,
which will help with another goal, lur-
ing big money institutional investors
to the platform.
With the lack of private MBS of-
ferings, some institutional investors
have begun trading scratch and dent
portfoliospools of loans with a mix
of performing, nonperforming and de-
faulted loans, and sometimes includ-
ing real estate owned properties.
Together, these loans are worth one
price, but split up, the performing
pieces can be sold at a higher proft.
Even notes in the bad loan pool can
be divvied up, with scratch loans
fetching more than the more damaged
or dented ones.
Robert Hodes, LoanMLS director of
institutional accounts, said many insti-
tutional investors are fnding opportu-
nities listing those portfolios of loans
on the website, while at the same time
connecting and building relationships
with hard-money players for potential
deals in the future.
The reaction is mixed. In certain
cases, people get it right away and go
and use the system, Hodes said. In
other cases, its really a new business
model and even thinking about using
the Internet to put up loans theyre in-
teresting in selling is a little bit foreign.
So it takes some educating.
OShaughnessy believes as more in-
stitutional types begin exploring alter-
native investments like hard-money
deals and the LoanMLS marketplace,
theyll like what they see. But itll take
changing some perceptions about the
ways private players can participate in
mortgage investing.
Institutional investors havent fg-
ured it out yet; they dont get our
space. Institutional investors are used
to getting a loan at 80% to 90% LTV
with a perfect credit score and great
income and accepting a yield of 3% or
4% on their bond, he said.
Thats what they feel comfortable
with when really, those are tragic
loans and the most unsafe loans on
the planet.
Hard-money deals typically have
lower loan to value ratios that of-
set lower borrower credit credentials.
OShaughnessy said that the loans he
produces have an average LTV of 40%
and can net investors coupons rang-
ing from 7% to 11%.
So its less risk, more reward, but
institutional investors typically want
to deal with an institutional player or
seller of loans and thats where the big
disconnect is, he said.
The small volume nature of most
hard-money lenders is hard to over-
come. OShaughnessy estimates most
institutional investors would start pay-
ing attention to deals valued at $5 mil-
lion or more. LoanMLS is one way deals
of that size could be structured, he said.
We post 30 loans per month and
we can deliver the quantity that
would attract a private investor,
OShaughnessy said. The institutional
investor that understands the story
needs to team up with a prolifc pro-
ducer of private money loans and rec-
reate a marketplace. The marketplace
is untapped, its huge. They just need
to fnd the right player.
Due Diligence,
Monitoring Key
Hard-money lenders arent the only
ones originating nonconforming mort-
gages that cant be purchased by the
Freddie Mac, Fannie Mae or Ginnie Mae.
For example, in its frst quarter 2011
earnings report, JPMorgan Chase dis-
closed a $12 billion portfolio of prime
mortgages originated with the intent
to sell, with an average balance of $17.4
billion. A spokesperson for the compa-
ny declined to provide any information
about the portfolio. But other sources
confrm that JPMorgan is selling whole
loan portfolios to institutional inves-
tors, making it possible that these loans
could be sold to institutional investors.
Even with the strict underwriting
standards employed by mortgage
lenders, investors who are snake bit-
ten by the losses incurred on the pri-
vate-label mortgage investments of
the past require the utmost assurances
that new originations are sound.
For pools of both new and existing
loans, investors are turning to technol-
ogy and data providers for answers
about potential investments. In re-
sponse, providers of those services are
bringing new products to market, as
well as revamping old technology to
respond to new demands.
Whole loan trading has been going
on for a long time; its not a new thing
by any stretch, said Afshin Goodarzi,
head of predictive analytics at New
York-based 1010data. But the pickup
and the interest in bringing in addi-
tional data assets to review and ana-
lyze, that is reasonably new; within
the past three years or so when people
started talking about it.
1010data took technology it was
using to review the quality of loans
in MBS deals and found an applica-
tion for it in the whole loan market.
An investor conducting a review of a
potential securitization or whole loan
deal will send 1010data a fle with
loan-level, nonpersonally identifable
information about a pool of loans.
Those anonymous data points in-
clude origination date, ZIP code of the
mortgaged property and loan amount,
among others.
The companys technology then
performs a crosscheck of the loan fle
data with the consumer credit profles
at Equifax to derive the identity of the
borrower. The Equifax data helps the
investor make a more informed bid on
a pool of loans because they have an
accurate and timely picture of the bor-
rowers current fnancial status.
Investors have realized that know-
ing whats going on in a borrowers
world in terms of credit is important,
said Greg Munves, executive vice pres-
ident at 1010data.
www.mortgage-technology.com 25
025_MTMay11 4 5/6/2011 1:24:20 PM
What their FICO score was three
years ago is not necessarily relevant at
this point, Munves added.
The size of the whole loan portfo-
lios getting these sorts of reviews can
range from the hundreds to the hun-
dred thousand. 1010data doesnt have
an accurate way to tell how much of
their increased business is due to an
increase in demand for data and ana-
lytics as opposed to an increase in
deal volume, but Goodarzi said these
methods will continue to proliferate as
the economy recovers and investors
return to the private-label secondary
mortgage market.
It is in response to how the mar-
ket is developing. The market is mov-
ing away from securitization, he said.
There havent been too many new
deals showing up, so the money is try-
ing to fnd additional places to go.
How the securitization model of
mortgage investment takes shape is
largely pending federal requirements
on risk retention requirements, spe-
cifcally the defnition of what consti-
tutes a qualifed residential mortgage
exemption from the DoddFrank Wall
Street Reform and Consumer Protec-
tion Act regulations.
Dave Hurt, a senior vice president
of business development at Santa Ana,
Calif.-based CoreLogic, believes many
whole loan market participants are
originating and trading whole mort-
gages with the expectation that the
securitization market will start to pick
up after the QRM defnition is fnal-
ized, so they want to have a relatively
fresh inventory qualifed loan inven-
tory in place to structure securities.
To do this, theyre using technology
and data to make sure they can dis-
pose of whole loans in the future.
People are using full suites of tools
or sections of suites like in a deli plat-
ter; a little of this, a little of that. Its all
to tailor a credit management architec-
ture to capture as much as they can
on the vetting process at the point of
origination, he said.
After origination, when loans have
to be continually monitored for per-
formance, investors are using similar
tools so they can always know whats
going on in their portfolio.
If they want to have these things
eligible for some sort of outcome in
a securitization, theyre going to have
to match those assets just as if theyre
freshly originated until the time they
would be putting them into a secu-
rity, Hurt added.
There are very creative and fexible
architectures that can be created and
are being leveraged by active play-
ers in the whole loan sector, as well
as those that would be planning some
sort of event in the form of a securiti-
zation after the fnal rule set is deter-
mined, he said.
Similar to evaluating current bor-
rower credit profles and debt-to-in-
come ratios, investors are using infor-
mation about local property values
and macro economic conditions to in-
form their opinions about worthwhile
investments and pricing decisions.
The old way was you got an ap-
praisal, you did a credit report, you
check the DTI on the borrower, you
made the loan, you put it in there and
then you hedge your interest rate risk
associated with the collateral until you
accumulated enough critical mass and
size to get an efcient execution on
the security, Hurt said.
If there were any problems with the
loans, rising home price appreciation
usually avoided losses, even in the
case of foreclosure. But the housing
market crash took that crutch away.
It wasnt that the investors werent
paying attention, but housing price
appreciation bailed out bad decisions
so you never saw the impact in the se-
nior bonds that weve seen in the past
four or fve yearsthe deterioration of
the real estate that was collateralizing
the mortgages, Hurt said.
There is now reliance on those data
and analytics so the determinate of
the risk associated with that particu-
lar pool of collateral in the security.
Theyre going to use the tools, he
continued. Theres a higher awareness
of what those tools are and what they
can do and certainly, the knowledge
exception doesnt exist anymore.
Return of Private-
Label Liquidity
Along with the pending QRM rules,
the secondary market is waiting to see
how the expected conclusion of the
Federal Reserves second quantitative
easing, or QE2, program in June will
impact mortgage bonds and subse-
quently, interest rates for borrowers.
If the other investment community,
those who bought those bonds before,
including the nonagency sector, come
in with the same sort of yield levels and
capacity as the Fed, this will be like a
pin drop in a room, you wont even no-
tice it. But thats a big if, Hurt said.
Meanwhile, as the new style of
whole loan activity continues to build
momentum, secondary market players
are realizing the beneft of technology
and data monitoring and as secondary
mortgage investing picks up, including
the potential return of private-label
MBS trading, the emphasis on quality
and the desire to track loan-level data
wont go away.
I cant overemphasize that its es-
sential for anybody thats in this space
on the front endirrespective of the
secondary market outcome of those
loansthey have to follow some pretty
signifcant disciplines, Hurt said.

Theres a higher
awareness of what those
tools are and what they
can do and certainly, the
knowledge exception
doesnt exist anymore.
Dave Hurt, CoreLogic
26 Mortgage Technology May 2011
026_MTMay11 5 5/6/2011 1:24:26 PM
careers have evolved in our space, but
not because they are incapable of un-
derstanding the material.
But they are not business men.
Most technology executives under-
stand the technology they are imple-
menting or licensing and take great
pride in it, but they dont always see
the whole picture; since they have
never transitioned from the role of a
specialist to a generalist, making busi-
ness decisions can sometimes be more
difcult for them.
Many have worked in software
development writing code, as sys-
tem administrators working on serv-
ers, or providing support on the help
desk. These posts are strong training
grounds for diverse technology ca-
reers, but executives working here are
learning more about technology than
business processes.
To diversify their business skills, tech-
nologists need to work in areas of the
business from which they do not tra-
ditionally evolve. For example, by ex-
posing them to roles in software qual-
ity assurance, product management or
participating as a business analyst, these
professionals are much more likely to
see the relationship between business
and technology. Unfortunately, few
executive technologists work in these
roles at any time during their careers.
They are signifcantly less like to have
been exposed to the business side, so
most unfortunately, never gain the op-
portunity to develop those skills.
There are, of course, examples of
CIOs who do have a broader base of
expertise. Any technologist who wants
to learn new skills could accept a job
with a startup and broaden their skills.
A recent college graduate, for instance,
may have been hired to write software,
but the fedgling frm, which employs a
small number of employees, also needs
a product plan for a new product and
so he is asked to write the frst draft.
By the time the company has 65 em-
ployees, a few years later, the college
grad is an experienced hand, one that
has been involved in all aspects of the
business, at many levels of the com-
pany. As a result, he brings a wider,
and a deeper understanding of how
the business works. He understands
better the demands and expectations
of clients, and the role of technology
in satisfying them. These executives,
in general, perform quite well in any
business environment.
Those opportunities are less common
today because there are fewer startups,
owing to the weak economy. There is
no question, however, that individuals
who develop the right blend of technol-
ogy skills and business experience tend
to make well-informed, more efective
professionals. They have developed
skill sets that transcend technology
which makes them particularly well-
prepared to be excellent chief technolo-
gistsand more often than nothighly
efective CEOs who can face a business
challenge and, step by step, fgure a
way to conquer it.

Steve Brothers is the executive vice president

and chief information ofcer for Urban Lend-
ing Solutions of Broomfeld, Colo.
Tech Outlook
Continued from page
To diversify their business skills, technologists need to
work in areas of the business from which they do not
traditionally evolve.
8r|og Loao $erv|c|og |o-ho0se
w|th 600's Techoo|ogy
0CC has oeen providind advanced loan servicind
technolod] solutions for over 8O ]ears. B] orindind
loan servicind in-house with 0CC ]ou oenefit
from havind more control over the manadement
and oversidht of ]our portfolio, developind
more meanindful customer relationships o]
directind the timind, content and freouenc] of
oorrower communication, and o] ouildind a unified
and consistent oorrower experience and overall
orand imade.
0et started br|ng|ng your |oan serv|c|ng
|n-house today ca|| 800-444-27
www.gccserv|c|ng.com
0080L
008 F800$$
0080L
008 F800$$
www.mortgage-technology.com 27
027_MTMay11 7 5/9/2011 12:33:49 PM
Mortgage technology: Why did
you leave Fannie Mae last year?
e.J. Kite: When I took the opportunity
with Fannie Mae in 2007, (former vice
president of credit loss management)
Jason Allnut had interviewed me. He
was the vice president over all of Dal-
lasback then there were fve vice
presidents and 650 employees. It was a
huge regional ofce where we had our
own culture and a good rapport with
everybody. I worked with the fve vice
presidents who were in Dallas.
When I got there, Jason told me that
hed get three reports and they say some-
thing diferent on each report. When I
got there, I knew I had an opportunity
to add value. That was the key thing.
What I was able to develop was a
single trusted source and reporting
that everyone understood and valued
the information that was on there.
We had put logos on all of our re-
ports that came out of my group. One
of the CFOs, Eric Schuppenhauer, came
to me about six months before I left
and he said, E.J., if I see your logo on a
report, I know the information is cor-
rect. I had created a brand, I created
an image and an opportunity that we
were able to create a vision that every-
thing that came out of our group was
a single trusted source.
Over time in Dallas, with the needs
of the default space, it brought more
and more folks from the corporate of-
fce down to the regional ofce. The cul-
ture started to change and the base of
people I supported was no longer those
fve vice presidents. When I left in 2010,
there were over 45 vice presidents that
we supportedand everyone a number
one priority and their own vision of
how they wanted their reports to look.
Q
A new vice president would come to
town and they would want to change
how we did things. It was apparent to
me that my run at developing some-
thing was going to end because I
wasnt able to develop and I couldnt
help them anymore because they just
wanted it their own way.
They developed their own mind-
set, the culture changed dramatically.
In some cases, it felt as if we were the
ones we caused the problems and they
moved down here to help us where
we failed.
It was a tough space to work in
where you were constantly bom-
barded by corporate folks telling you
we screwed up and they were here to
make it better.
Mortgage technology: Is that a
challenge you think Fannie still faces today?
e.J. Kite: Defnitely. What happens,
especially in the technology and busi-
ness management reporting space,
they belong in an area that has a fo-
cus. Someone from the business who
knows what they need to manage to
business.
Currently, in that particular orga-
nization, because of the culture shift
that has occurred, there is a lot of tech-
nology that is being presented to the
business and that technology is whats
taking center stage.
When needs are not being met, then
management reporting sufer and the
information sufers.
For example, if theres a report thats
been in use for an extended period of
time and a change needs to be made
on the report because the business
needs it to change; the process in that
current organization to make a change
to that production report has grown
so long. It is now to the point where
it can take well over four to six weeks
just to make a simple, noncomplex
coding change, because of all the new
controls that are in place.
When I got there, the business had a
need and I was able to deliver on the
need with great controls. Now, when a
business needs to make a change, cor-
porate governance takes over and it
takes a long process to get something
changed and moved through the pipe-
line. I think thats whats frustrating
a lot of people there. I dont see that
changing anytime soon.
Theyre under conservatorship and
I understand there are a lot of rules
and they have to be careful. In their
situation, they obviously have to be
very careful about things that provide
wrong numbers, bad information,
things like that. I get that, but if you
go from one extreme to the other, its
almost too severe.
Mortgage technology: What was
the opportunity to fll a need that you saw as
an opportunity to deliver at Wingspan?
e.J. Kite: It was not necessarily a
need, but more of a focus. With Steve
Horne, the CEO of Wingspan, he un-
derstands and values information and
technology. Thats why Wingspan has
been named a Mortgage Technology Ser-
vicer of the Year. Working for him and
working for Wingspan provides me
an area to focus my skills within an
organization that already understands
the value of good technology and the
value of information.
Its kind of like sharpening the tip
a little bit. They were already well-
versed in technology and reporting,
but with my 27 years of experience, it
allows me to focus their needs towards
clients, internal and management re-
porting. It wasnt a lack in anything,
but with my area of expertise of devel-
oping another look and feel for how
reporting should be done. My role is
to make sure that when were report-
ing, that we dont miss anything mate-
rial. We dont want to be surprised by
numbers or something that a report or
information can tell us.
Mortgage
example of something youve changed or
brought more focus to at Wingspan?
e.J. Kite: Ive sort of instilled in my
team a diferent way to look at report
ing. At the GSEs, I worked with and
for the CFO. In the CFO function, they
value information. They dot every
i and cross every t. When I got here,
what was very clear to me was that
there was not a strong framework the
analyst used to develop reporting.
At Wingspan, Ive been working Eric
Stewart in California at DRI Manage
ment Systems. He used to be a consul
tant for Freddie Mac for many years
and his area of expertise is in man
agement reporting and management
information.
His framework is called the results
oriented information approach, the
ROI approach. It allows us to create
a framework, just like an accountant
would. When you talk to an accoun
tant, every bit of information and
piece of data has a place on the bal
ance sheet, a proft and loss or income
statement. In management reporting,
its very similar to that. Data is either
referenced, status, performance or f
nancial. There are certain frameworks
you have to understand.
When I got here, some of the things
I wanted to educate my staf and the
leadership here is when we look at re
ports and understand what it is youre
trying to manage and what are you
managing for.
Its a simple question, but we go
through that process. When someone
comes to me with a need for a report,
I simply ask what are you trying to
manage? For example, it could be try
ing to manage REO inventory. So I ask
what are you trying to manage for?
And that could be reducing timelines
and decrease costs. So the asset youre
managing is REOs and youre trying
to manage for lower timelines and de
creased costs.
30 Mortgage Technology May 2011
030_MTMay11 3 5/6/2011 1:24:56 PM
When I got there, the business had a
need and I was able to deliver on the
need with great controls. Now, when a
business needs to make a change, cor-
porate governance takes over and it
takes a long process to get something
changed and moved through the pipe-
line. I think thats whats frustrating
a lot of people there. I dont see that
Theyre under conservatorship and
I understand there are a lot of rules
and they have to be careful. In their
situation, they obviously have to be
very careful about things that provide
wrong numbers, bad information,
things like that. I get that, but if you
go from one extreme to the other, its
echnology: What was
the opportunity to fll a need that you saw as
an opportunity to deliver at Wingspan?
It was not necessarily a
need, but more of a focus. With Steve
Horne, the CEO of Wingspan, he un-
derstands and values information and
technology. Thats why Wingspan has
Mortgage Technology Ser-
vicer of the Year. Working for him and
working for Wingspan provides me
an area to focus my skills within an
organization that already understands
the value of good technology and the
Its kind of like sharpening the tip
a little bit. They were already well-
versed in technology and reporting,
but with my 27 years of experience, it
allows me to focus their needs towards
clients, internal and management re-
porting. It wasnt a lack in anything,
but with my area of expertise of devel-
oping another look and feel for how
reporting should be done. My role is
to make sure that when were report-
ing, that we dont miss anything mate-
rial. We dont want to be surprised by
numbers or something that a report or
Mortgage technology: Whats an
example of something youve changed or
brought more focus to at Wingspan?
e.J. Kite: Ive sort of instilled in my
team a diferent way to look at report-
ing. At the GSEs, I worked with and
for the CFO. In the CFO function, they
value information. They dot every
i and cross every t. When I got here,
what was very clear to me was that
there was not a strong framework the
analyst used to develop reporting.
At Wingspan, Ive been working Eric
Stewart in California at DRI Manage-
ment Systems. He used to be a consul-
tant for Freddie Mac for many years
and his area of expertise is in man-
agement reporting and management
information.
His framework is called the results
oriented information approach, the
ROI approach. It allows us to create
a framework, just like an accountant
would. When you talk to an accoun-
tant, every bit of information and
piece of data has a place on the bal-
ance sheet, a proft and loss or income
statement. In management reporting,
its very similar to that. Data is either
referenced, status, performance or f-
nancial. There are certain frameworks
you have to understand.
When I got here, some of the things
I wanted to educate my staf and the
leadership here is when we look at re-
ports and understand what it is youre
trying to manage and what are you
managing for.
Its a simple question, but we go
through that process. When someone
comes to me with a need for a report,
I simply ask what are you trying to
manage? For example, it could be try-
ing to manage REO inventory. So I ask
what are you trying to manage for?
And that could be reducing timelines
and decrease costs. So the asset youre
managing is REOs and youre trying
to manage for lower timelines and de-
creased costs.
Then we go through
a process and like an
interview, we explore
the drivers that would
impact those two things
so when we develop
a report for them, it
completely answers the
question and may even
answer questions they
didnt know they had.
Ive developed a
framework for my team
so they can build better
reports on their own.
Weve also developed
some really good, cus-
tomized reports that
answer questions and
provide us the ability
to see things that other-
wise we wouldnt know
until after the fact.
Weve started produc-
ing executive and line
reporting on computers
and TVs throughout the
company. We have fve
TVs where we present
management reports
and some of these re-
ports refresh every fve
minutes. So every day,
our staf can see not
only how well theyre
doing, but also how their team and
the company are doing.
Mortgage technology: How does
management reporting and its related tech-
nology coordinate with the technology that
automates and manages processes and tasks?
e.J. Kite: Back in the day if you were
separated by a foor or a building,
that data would be contained in that
building or foor. But with the advent
of technology, were able to share in-
formation very easily and we have the
ability to reduce the impact of those
information silos.
One of the advantag-
es that Wingspan has
over a legacy process,
theyve developed these
transaction and origi-
nation systems, these
servicing platforms, to
have the ability to talk
to each other.
We use Interlink Loan
Servicing and DRI and
those two systems pass
information back and
forth. Its very trans-
parent to the user and
were able to automate
workfow and develop
tasks. With that, every
morning when the user
comes in, they know ex-
actly what the most im-
portant thing for them
to do today.
Thats an extremely
important technology
to have for managing
processes. But without
management reporting
and the ability to see
if a someone took 17
hours to do a task that
took everyone else fve
hours, its like trying to
fsh in a lake where the
fsh are 50 yards and
you only have 40 yards of line.
Youre able to do a lot with automa-
tion and with systems that are trans-
parent, but without that reporting
layer on top that captures information,
you only have half the story. The larg-
er companies I worked at had siloed
bits of information. They had siloed
reporting and processes.
I think that happens over time. Fan-
nie Mae was started in the 40s, Fred-
die in the 70s. Over time, they were
obviously building systems to accom-
modate volume and diferent products
like everybody else.
Spotlight on
E.J. KitE
K
ite is in charge
of leading
Wingspans technol-
ogy infrastructure,
reporting and analyt-
ics capabilities and
integrating the many
software tools that
support the compa-
nys needs. He began
his career at Freddie
Mac and later joined
Resurgent Capital
Services, where he
was a senior director.
He then spent three
years at Fannie Mae,
before joining Dallas-
based Wingspan in
late 2010.
www.mortgage-technology.com 31
031_MTMay11 4 5/6/2011 1:25:09 PM
Look at Bank of America and Coun-
trywideB of A had to make a decision
on which platform to use, theirs or
Countrywides. All that workfow un-
derneath probably works great, but if
they dont have reporting on top of it,
then its really kind of tough. I see it as a
great handshake between the two.
In everything we do in our business, I
break it down into three thingspeople,
process and tool. You can have phenom-
enal peopleand Fannie Mae has got
some of the best people Ive ever worked
withbut you have to have a really good
process and really good tools.
Without any focus on those other two
things, the people get really good be-
cause the process and the tools havent
kept pace. You have really good defense
to make up for the lack of ofense.
Some of the better systems in spe-
cialty servicing, all three things have to
be working extremely well. You have
to have the best of all three things be-
cause the cost of doing our job is a lot
more expensive. Were success-based
performance. For our clients in many
cases, we have to perform or else we
dont get paid. If youve got that incen-
tive working for you, youre going to
have the best people, the best process
and some of the best tools. Thats what
intrigued me about working for Steve
because he gets that.
Mortgage technology: Do you think
specialty servicers get technology and data
better than the broader servicing industry?
e.J. Kite: Get is probably not the
right word, but I think they have to.
Most organizations understand the
value of those two things, I dont think
theres anyone who would say one is
important and the other isnt. But for
a high-touch special servicer, if you
dont do those things, youre not going
to survive. Its a very difcult business
to be in if you dont have your cost
of servicing at a point where you can
manage that entire suite from when
a loan is boarded, to the transaction
process and through the management
reporting and accounting part of it. If
that becomes very expensive and you
dont know whats going on in your
business it will be hard to survive.
Larger companies get that. We start-
ed in 2008, and there are other com-
panies that started in 2002-2004; theyll
all going to do just fne. But the larger
servicers, back in the 80s and 90s, they
would have never seen this coming, that
the volume of REO would be so high.
Theres probably no way they would
have known to build their systems to
accommodate that. That of course begs
the question should they have known
and should have someone put more re-
search into that, I dont know.
But I think we know in our space,
what our volume is going to be and
what were capable of handling. Steve
has never said he wants to be small.
We have built up the core competency
and the capability to be as large as we
can be but still meets and manages
what were here to do.
Mortgage technology: How should
a specialty servicer use technology to promote
the very people-oriented processes involved in
high-touch servicing?
e.J. Kite: Our systems of record have
to have all the pertinent information.
We have to have the ability to have
real-time reporting; it cant have any
latency to it. We also have to have
great partners and vendors. Were go-
ing to have to do due diligence on a
loan before we do our borrower out-
reach. We have a fle we have to work
and we might have to do a skip trace
or do some door knocking to reach
these borrowers for our clients. Tech-
nology is extremely important, as is
having a good vendor network.
If we send information of for door
knocking, we need to do almost in-
stantaneously whats going on with
that campaign.
If we dont know whats going on for
a week or two at a time, it prohibits
us from being successful. Its really im-
portant to have systems that capture
the information and vendors who can
transmit and support our platforms.
We work with certain systems and
its a prerequisite for our vendors to
integrate with them and it makes our
life very easy. Just having some com-
fort in the information we have is in
a system and process thats trusted
so when management gets report-
ing from there, they know the data is
trusted and correct.
Mortgage technology: Given the
emphasis you put on the strengths and necessity
of technology and reporting, from your experience
at the GSEs, what are the strengths and weak-
nesses of technology at Fannie and Freddie?
e.J. Kite: The strengths obviously are
a very robust technology set. Theyve
done quite a bit of work to get some
great tools and technologies. But most
people will tell you that your biggest
strength is also your biggest weakness.
Because of the complexity in their
very good technologies, its difcult to
corral and manage them. If you have
an Oracle instance, a Sybase instance,
a mainframe, this and that, because of
that ability to grow and be fexible.
People seem to forget that four years
ago, Fannie and Freddie were making
more money than anyone would have
ever expected and nothing was a prob-
lem, everything worked great. The sys-
tems were fne and they had few issues.
With the volumes and increased ca-
pacity that these systems needed, you
cant invest very much money in that
many diferent systems. If you have a
core set of systems, then you can always
stay ahead of the curve with technology.
If youre managing 10 to 20 systems, al-
most from a development perspective,
you have to identify and pick which
ones you want to invest in, upgrade and
hire the technologists to support.
With these technologies, theyre
very fexible. When a new product
was created in 2002, they were able
to accommodate that. But what their
biggest weakness was is that they built
another system for that. With Fannie
Mae in particular, theres always going
to be a challenge to integrate all that
information together.
Every night, those systems have to
use a batch process to compile, com
bine and process all that information.
Those batch windows start when the
systems go down and have to end
before the systems come back up the
next morning. In many cases, those
systems have become so complex; the
batch windows are running longer
and longer into the day.
Theyre very fexible and are able to
accommodate the needs of the indus
try. But where that will get them in a
bit of heartache is how you manage
those systems.
Back to the analogy of data contained
in diferent building or foor: With most
large systems, sometimes you have a
need to do something and their very
talented employees are capable of build
ing their own reports and are capable
to build their own mini system to help
their job. If System A does one thing and
System B does something else, but they
dont talk to each other, the employee
might build a process where it takes the
data out of those two systems, combines
them, put them in a spreadsheet and
thats what they work of of; its called
an end-user system.
These larger companies end up hav
ing a huge problem because organiza
tions cant meet the demand of every
individual. There are 9,000 employees
at Fannie Mae and they are capable of
building their own mini-systems, but
thats the problem you see with these
large organizations, they cant manage
the one-of needs through these com
plex systems, so people build their own.
Thats always going to be a challenge.
32 Mortgage Technology May 2011
032_MTMay11 5 5/6/2011 1:25:13 PM
If we dont know whats going on for
a week or two at a time, it prohibits
us from being successful. Its really im-
portant to have systems that capture
the information and vendors who can
transmit and support our platforms.
We work with certain systems and
its a prerequisite for our vendors to
integrate with them and it makes our
life very easy. Just having some com-
fort in the information we have is in
a system and process thats trusted
so when management gets report-
ing from there, they know the data is
echnology: Given the
emphasis you put on the strengths and necessity
of technology and reporting, from your experience
at the GSEs, what are the strengths and weak-
nesses of technology at Fannie and Freddie?
The strengths obviously are
a very robust technology set. Theyve
done quite a bit of work to get some
great tools and technologies. But most
people will tell you that your biggest
strength is also your biggest weakness.
Because of the complexity in their
very good technologies, its difcult to
corral and manage them. If you have
an Oracle instance, a Sybase instance,
a mainframe, this and that, because of
that ability to grow and be fexible.
People seem to forget that four years
ago, Fannie and Freddie were making
more money than anyone would have
ever expected and nothing was a prob-
lem, everything worked great. The sys-
tems were fne and they had few issues.
With the volumes and increased ca-
pacity that these systems needed, you
cant invest very much money in that
many diferent systems. If you have a
core set of systems, then you can always
stay ahead of the curve with technology.
If youre managing 10 to 20 systems, al-
most from a development perspective,
you have to identify and pick which
ones you want to invest in, upgrade and
hire the technologists to support.
With these technologies, theyre
very fexible. When a new product
was created in 2002, they were able
to accommodate that. But what their
biggest weakness was is that they built
another system for that. With Fannie
Mae in particular, theres always going
to be a challenge to integrate all that
information together.
Every night, those systems have to
use a batch process to compile, com-
bine and process all that information.
Those batch windows start when the
systems go down and have to end
before the systems come back up the
next morning. In many cases, those
systems have become so complex; the
batch windows are running longer
and longer into the day.
Theyre very fexible and are able to
accommodate the needs of the indus-
try. But where that will get them in a
bit of heartache is how you manage
those systems.
Back to the analogy of data contained
in diferent building or foor: With most
large systems, sometimes you have a
need to do something and their very
talented employees are capable of build-
ing their own reports and are capable
to build their own mini system to help
their job. If System A does one thing and
System B does something else, but they
dont talk to each other, the employee
might build a process where it takes the
data out of those two systems, combines
them, put them in a spreadsheet and
thats what they work of of; its called
an end-user system.
These larger companies end up hav-
ing a huge problem because organiza-
tions cant meet the demand of every
individual. There are 9,000 employees
at Fannie Mae and they are capable of
building their own mini-systems, but
thats the problem you see with these
large organizations, they cant manage
the one-of needs through these com-
plex systems, so people build their own.
Thats always going to be a challenge.
The biggest strength they have is the
ability to do that. The people are phe-
nomenal. The problem they have is
how do you manage having hundreds
of these access databases?
If someone creates a mini-system
and leaves to take another job, some-
one else has to manage that with no
documentation, system support and
we dont even know if the code was
done correctly. So one the challenges
that we undertook when I was at Fan-
nie Mae was to corral those end-user
systems and develop and try to reduce
their footprint.
Continued on page 40
www.mortgage-technology.com 33
033_MTMay11 6 5/6/2011 1:25:44 PM
While the PPE has always been used
to deliver quick loan quotes with a
minimum of consumer data, these days
fewer lenders are satisfed with using
an of-the-shelf prequalifcation tool.
As lenders are forced to adapt to
what has become a constantly chang-
ing, regulatory intensive landscape,
said Newport Beach, Calif.-based consul-
tant Joe Bowerbank, PPE vendors must
also adapt. If a vendors PPE technology
isnt fexible enough, theyre going to be
hard-pressed to meet new industry de-
mands and thus client needs.
Bowerbank has an intimate knowl-
edge of the inner workings of PPE pro-
vidershe was the senior vice president
of marketing and strategic alliances at
Loan-Score Decisioning Systems until
his departure shortly after loan origina-
tion software developer Calyx acquired
the company last December.
Confguration tools that put lend-
ers in more control of their engines and
point-of-sale oferings will be key to ven-
dor and lender sustainability, he added.
Leading-edge technology can en-
able a lender to comply with rapidly
changing regulations on an auto-
mated basis. However, fexibility is
not simply a function of technology;
it also encompasses adaptability to a
users stated needs. Vendors of todays
stand-alone PPEs are intensely aware
that they are measured by the level of
customer service, training and system
confgurability they ofer users.
Every day the uncertainties of the cur-
rent mortgage market give PPE vendors
new opportunities to be proactively
helpful to their lender customers. Loan
ofcer compensation is a case in point.
By the time new Regulation Z changes
to loan ofcer compensation took efect
in early April, many major PPE vendors
had already released updates and new
features to their software to help lenders
comply with the new regulations.
In March, for example, Appleton,
Wis.-based LoanSifter announced en-
hancements to its product suite to help
clients customize and report on loan
ofcer compensation plans across a
lenders entire system, including prod-
uct search results, LOS integrations, the
secondary desk, management reports,
rate quotes and marketing campaigns.
Also in March, Lincoln, Neb.-based
Mortech added safe-harbor disclosures,
administrator tools and LO performance
tools to its new Marksman release.
Mount Arlington, N.J.-based NYLX
meanwhile ofered a white paper on
LO compensation, and new features to
its LoanDecisions PPE, including par
rate management tools, enhanced pric-
ing displays and originator commission
displays that can be turned on and of.
Retooling the
PPE Mission
With Fannie and Freddie under the gun
to justify their very existence, the GSEs
are holding lenders to strict loan quality
standards. Lenders therefore are looking
to their PPEs to help them handle every
nuance of loan price adjustments.
Meanwhile the volume of loans han-
dled by stand-alone PPEs has dimin-
ished as third-party originations have
shrunk and the megalenders have in-
creased their own origination market
share, using internal pricing technol-
ogy. What that has meant for small and
midsized lenders is they must compete
by ofering a level of service that larger
lenders cant match. They look to the
PPE to help accomplish that.
LOS vendors serving the smaller lend-
ers have to decide which PPEs to make
their partners via tight integrations.
One simple criterion is to integrate
with the PPEs that their lenders use. But
given todays uncertain market, LOS ven-
dors also have to be conscious of the
quality of performance ofered by PPEs.
LOS vendor MortgageBuilder, as an
example, has gone to the trouble and ex-
pense of creating tight integrations with
only two PPEs, Optimal Blue and NYLX.
MortgageBuilder president Keven
Smith has seen substantial changes in
PPEs since the mortgage meltdown.
During the refnance boom, there
were probably thousands of loan al-
ternatives facing originators as they
went about their daily business, he
said. The PPE was an essential part
of that environment, just to assist in
fguring out the alternatives amid the
glut of programs. Today, of course, the
role has changed because the loan se-
lection is drastically reduced and there
are far fewer investors available. Not
only does the PPE help in the fne-tun-
ing of pricing among the mostly va-
nilla loan oferings, it is fnding other
ways to assist at the point of sale.
Two attributes of a best-of-breed PPE
that Smith singled out are bidirectional
feed and workfow enhancement. A
bidirectional feed is important for pre-
cision and speed, he said. When send-
ing 20 or more felds, some will need
to be updated automatically, while oth-
ers may take manual attention. Doing
this properly without bidirectional ca-
pabilities would be far more difcult,
particularly if signifcant loan volume
is involved, he added.
Workfow capabilities provide fexibility
to lenders who want to be able to do more
preliminary work before beginning the
process with their LOS.
Keven Smith, President, MortgageBuilder
Continued on page 38
36 Mortgage Technology May 2011
036_MTMay11 3 5/6/2011 1:25:52 PM

WM 8MouLb ou tN1tR ouR coMANt
Technology is driving change in the mortgage industry. This trend has led to a food of
new companies entering various niches of the market and trying to fulfll a perceived
need. This is your chance to show that your company stands above the rest, that it has
a demonstrated business model and has a track record of success.
Entering also shows your support for technology development as a discipline within the
industry. Many teams have put in a lot of hard work coming up with technology driven
solutions they can be proud of. This is a chance for them to be recognized by their
peers. It also doesnt hurt that such recognition can make partnerships and business
opportunities easier to come by.
tN1R foRM but )uL 81, z0
v||1 k|0|1kA1|0N.M0k10A0|-1|CHN0|00.C0M 10 k|0|1|k
AN qut81loN8t
Contact Austin Kilgore at 212.803.8242 or Austin.Kilgore@sourcemedia.com
Brought to you by
For the Twelfth year, Mortgage Technology will once again be recognizing the most
innovative technology-focused companies in the mortgage industry. An awards
ceremony will be held and winners and fnalists will be recognized in the special
awards edition of the magazine.
Awards honoring achievement in development and implementation of mortgage lending technology
will be given in the following categories:
1Mt 1tcM AWARb8
OnlInE OrIgInATOr AwArd
SErvICEr OF ThE YEAr AwArd
grEEn lEndEr AwArd
STEvE FrASEr vISIOnArY AwArd
lASTIng IMpACT AwArd
hArnESSIng MOBIlE AwArd
SYnErgY AwArd
10X AwArd
FIX-IT AwArd
rElEASE OF ThE YEAr AwArd
2
0
1
1
037_MTMay11 7 5/9/2011 12:27:15 PM
Flexibility and
Service
NYLX has been around long enough
to boast enhanced integrations with
a number of other loan origination
systems, including Ellie Maes Encom-
pass360 and PCLender. Founded in 1998
to help mortgage brokers take Real Es-
tate Settlement Procedures Act-compli-
ant mortgage applications, in 2003, NYLX
turned its full attention to the mortgage
arena. By 2005 the company was help-
ing mortgage lender The Money Store
provide product and pricing tools to
borrowers online, while its LoanDeci-
sions tool continues to be refned.
Today, said Steve Koenigsberg, capi-
tal markets manager for Morganville,
N.J.-based First Choice Bank, he is able
to handle the secondary market pro-
cess with only one other employee,
because NYLX is seamlessly integrated
with our [Encompass360 Banker] LOS
to give loan ofcers the reliable pricing
and eligibility assurance they need.
While Koenigsberg acknowledges
that other PPEs bring strengths to the
niches they work in, he said that even
if NYLX were to cost more, wed pay
more for it. His most strongly voiced
praise was for the high level of custom-
er service and training NYLX provides.
There are a number of nuances in
the new regs, he said. Weve participat-
ed in their focus groups on compliance
and legal issues. They were really open
to hearing what we wanted to meet our
needs on safe-harbor rules and so on.
While acknowledging that a key PPE
function is identifying best execution
quickly and accurately, NYLX president
Louis Altieri said, True value comes
from the ability to fexibly adapt tech-
nology to a lenders origination work-
fows and business model. NYLX has
prioritized fexibility as a key attribute
and diferentiator of our platform.
With both originator and second-
ary marketing functionality, we also
give lenders the fexibility to adapt our
solution as they evolve, from broker to
banker or perhaps from best eforts to
mandatory, Altieri added.
Do it All at the
Point of Sale
Mortech is another veteran PPE pro-
vider. In 1998 the company released
SRPCalc, which then evolved into its
Marksman product. In January 2011
Mortech launched an all-inclusive
front-end system called Bullseye that
pairs Marksman with automated un-
derwriting and other systems. Bullseye
is ofered as a way to shrink todays
longer loan application process caused
by increased regulations and verifca-
tion requirements. A lot of technology
companies create auto-logins and call
them connections, said Mortech presi-
dent Don Kracl. The Marksman-Bulls-
eye technology goes beyond a simple
plug-in; its a seamless integration that
connects all critical loan platforms so
users are staying in one system.
With the new technology, lenders
can access pricing, full credit reports,
get approval on the government-
sponsored enterprises automated
underwriting systems, create bidirec-
tional communication with their LOS
and manage their documents without
leaving the Marksman environment.
As a measure of its willingness and
ability to tailor PPE functionality to the
expressed needs of its lenders, Mortech
boasts that its tech team issues new up-
dates and releases on a six-week cycle.
Along with a number of other PPE
vendors, Mortech provides support to its
lenders who advertise rates on Google
Comparison Ads. The efort between
Google and the PPE and lead genera-
tion vendors launched in January 2010,
but months before the launch, Mortech
was sued by another rate search website,
LendingTree, which alleged Mortech vio-
lated an existing business agreement.
The dispute was quickly settled out
of court a month after the initial law-
suit was fled and Mortech defended its
track record of treating all its partners
and customers with equal respect, and
has not slowed down in expanding its
presence in the lead aggregation space.
The online lead generation sites are
continuously growing, said Kracl. Lead
aggregators ofer diverse opportunities
for lenders to connect with borrowers
on a variety of diferent platforms. Were
proud to be a part of the space no mat-
ter which aggregator were supporting.
According to Google, Mortech serves
more than half of the lenders who ad-
vertise on the Comparison Ads plat-
form. Kracl said Mortech can have
lenders signed up on the platform and
quoting in less than 24 hours.
When we launched Comparison
Ads, we wanted to create a better user
experience for people looking for mort-
gages online, said a Google spokes-
man. Mortech played an integral role
in our ability to launch and fne-tune
this ofering and make that goal a re-
ality. Mortechs vast knowledge of the
mortgage industry and experience in
lead management has been a key part
of our ability to quickly connect con-
sumers and mortgage lenders.
With some estimates putting the rate
of shoppers who look for loan infor-
mation online at 70% of all prospective
borrowers, PPE vendors are all vying to
support online lead aggregators.
The Internet lets a consumer do bet-
ter research on a bank, said Kracl. They
will do multiple queries about the bank
before they lock. Buyers doing their due
diligence on the Internet are two-and-a-
half times more likely to stick with the
lender they pick. The lead management
objective is to create a true relationship,
start the application, and move forward
with confdence that the transaction will
be completed successfully.
A problem though is leads generated
on the Internet, no matter how well vet-
ted, can be fipped by real estate agents
to a favorite broker or loan ofcer.
To address that problem, Mortech has
entered a relationship with the RealXRe
ferral network of real estate brokers.
When a loan ofcer using Marksman
begins the pre-approval process, a search
is triggered for a real estate agent partner
via a short referral form pre-populated
with borrower information. The LO and
real estate agent then work together to
coordinate closing the home sale.
Automate
Everything You Can
Former Loan-Score development
manager Al Ogrodski left the com
pany after the Calyx acquisition and
joined LoanSifter as senior developer,
given the mission of building out the
best AUS embedded in any PPE. With
todays advancements in PPE technol
ogy, a credit-based decision via an
AUS is ideal prior to locking the loan,
as this leads to a more accurate price
which now serves as the cornerstone
of many compliance regulations, said
LoanSifter president Bruce Backer.
Rather than adapting its technology
to established business practices, Loan
Sifters goal is to automate every process
and function it can, such as the lock desk
itself. The ability of a PPE to secure an
automated lock is becoming increasingly
important, in that the proft margins are
thinning, and sometimes seconds count
in terms of market volatility, Backer said.
With todays advancements in PPE tech
nology, a credit-based decision via an
AUS is ideal prior to locking the loan, as
this leads to a more accurate price which
now serves as the cornerstone of many
compliance regulations.
Founded in 2004 and built from
scratch, LoanSifter ofers pricing rate
sheets from 160 correspondent and
wholesale investors. A PPE absolutely
needs to be a lead generation tool these
days, said Backer, who puts LoanSifters
eOriginations platform up against all
competing productsincluding the
older technology of companies like
Mortgagebot.
PPE
Continued from page 36
38 Mortgage Technology May 2011
038_MTMay11 4 5/6/2011 1:25:56 PM
The dispute was quickly settled out
of court a month after the initial law-
suit was fled and Mortech defended its
track record of treating all its partners
and customers with equal respect, and
has not slowed down in expanding its
presence in the lead aggregation space.
The online lead generation sites are
continuously growing, said Kracl. Lead
aggregators ofer diverse opportunities
for lenders to connect with borrowers
on a variety of diferent platforms. Were
proud to be a part of the space no mat-
ter which aggregator were supporting.
According to Google, Mortech serves
more than half of the lenders who ad-
vertise on the Comparison Ads plat-
form. Kracl said Mortech can have
lenders signed up on the platform and
quoting in less than 24 hours.
When we launched Comparison
Ads, we wanted to create a better user
experience for people looking for mort-
gages online, said a Google spokes-
man. Mortech played an integral role
in our ability to launch and fne-tune
this ofering and make that goal a re-
ality. Mortechs vast knowledge of the
mortgage industry and experience in
lead management has been a key part
of our ability to quickly connect con-
sumers and mortgage lenders.
With some estimates putting the rate
of shoppers who look for loan infor-
mation online at 70% of all prospective
borrowers, PPE vendors are all vying to
support online lead aggregators.
The Internet lets a consumer do bet-
ter research on a bank, said Kracl. They
will do multiple queries about the bank
before they lock. Buyers doing their due
diligence on the Internet are two-and-a-
half times more likely to stick with the
lender they pick. The lead management
objective is to create a true relationship,
start the application, and move forward
with confdence that the transaction will
be completed successfully.
A problem though is leads generated
on the Internet, no matter how well vet-
ted, can be fipped by real estate agents
to a favorite broker or loan ofcer.
To address that problem, Mortech has
entered a relationship with the RealXRe-
ferral network of real estate brokers.
When a loan ofcer using Marksman
begins the pre-approval process, a search
is triggered for a real estate agent partner
via a short referral form pre-populated
with borrower information. The LO and
real estate agent then work together to
coordinate closing the home sale.
Automate
Everything You Can
Former Loan-Score development
manager Al Ogrodski left the com-
pany after the Calyx acquisition and
joined LoanSifter as senior developer,
given the mission of building out the
best AUS embedded in any PPE. With
todays advancements in PPE technol-
ogy, a credit-based decision via an
AUS is ideal prior to locking the loan,
as this leads to a more accurate price
which now serves as the cornerstone
of many compliance regulations, said
LoanSifter president Bruce Backer.
Rather than adapting its technology
to established business practices, Loan-
Sifters goal is to automate every process
and function it can, such as the lock desk
itself. The ability of a PPE to secure an
automated lock is becoming increasingly
important, in that the proft margins are
thinning, and sometimes seconds count
in terms of market volatility, Backer said.
With todays advancements in PPE tech-
nology, a credit-based decision via an
AUS is ideal prior to locking the loan, as
this leads to a more accurate price which
now serves as the cornerstone of many
compliance regulations.
Founded in 2004 and built from
scratch, LoanSifter ofers pricing rate
sheets from 160 correspondent and
wholesale investors. A PPE absolutely
needs to be a lead generation tool these
days, said Backer, who puts LoanSifters
eOriginations platform up against all
competing productsincluding the
older technology of companies like
Mortgagebot.
LoanSifter has a strategic relationship
with the LeadPress mortgage market-
ing website and with Zillow, boasting
that it quotes nearly 6 million loan
scenarios per month on Zillow alone,
far eclipsing the rest of the feld.
Because its Web tools are dynamic
widgets rather than static templates, he
said, they can be posted on a real estate
agents website with drag-and-drop ease
to cement a transactional relationship
that goes well beyond a mere link.
Backer said his company targets pro-
fessionals who are serious about obtain-
ing the technology to fully originate a
loan online afordably, at a level match-
ing the websites of the biggest banks.
There is little question that program-
mers for newer PPEs, freed from making
system enhancements to please installed
users, can deliver a higher level of auto-
mation. However, the question is how
much lenders actually want their prod-
uct and pricing engine to do all by itself.
I see PPE platforms as having to be
able to fex with the unknown, said
Bowerbank, because if they cant, theyll
only be able to meet the needs of a lim-
ited type and number of lending orga-
nizations. The PPEs that have developed
fexible platforms and workfows, and
are able to quickly add robust function-
ality, will be able to respond to the needs
of a diverse client base, whose demands
will defne the next generation of prod-
uct-and-pricing engines.

Index of AdvertIsers
Advertiser Pg #
CoreLogic
www.credco.com/littlelie 20-21
CoreLogic WillCap
www.corelogic.com/willcap 11
Document Systems
www.docmagic.com 5
LendingSpace
www.lendingspace.com 15
GCC Servicing Systems
www.gccservicing.com 27
Service Link
www.servicelinkfnf.com 7
With todays advancements in PPE
technology, a credit-based decision via an
AUS is ideal prior to locking the loan, as
this leads to a more accurate price.
Bruce Backer, President, LoanSifter
www.mortgage-technology.com 39
039_MTMay11 5 5/9/2011 12:36:50 PM
Mortgage technology: Is the per-
ception that Fannie Mae is more forward
thinking than Freddie Mac in terms of how it
acquires and utilizes new technology a reality
or a myth?
e.J. Kite: I left Freddie Mac in 2005
and went to Fannie in 2007. And my
area of expertise in management re-
porting, so Im more knowledgeable
in the data warehouse side of it, where
reporting comes from, not so much
the technology used to process loans.
When I was at Freddie Mac, we al-
ways felt that Fannie Mae was the pin-
nacle of technology and Freddie Mac
was a fast follower in many cases, usu-
ally with product announcements.
In 2001, when I was at Freddie Mac,
we had developed a robust corporate
data warehouse to move people of
mainframe reporting and on to more
of a snapshot environment where we
could generate reports and know what
the business looked like from any spe-
cifc, single point in time.
When I got to Fannie Mae in 2007,
I started asking questions about how
the reporting was done.
From a reporting standpoint, think
about it like when you look at your
checking account. You want to know
what your activity was yesterday. You
want to know what was deposited and
what was pulled out every night. You
want to have some sort of a record of
it. You dont necessarily want it to be
very dynamic.
When I was at Fannie Mae, the ma-
jority of the reporting, well over 90%
of it, was being run of those transac-
tion systems.
If Im writing a report that tells me
the volume of REO inventory today,
yesterday, those types of things, only
certain things could be asked of this
report generating technology.
It sat on top of the transaction sys-
tem that the REO specialist was using.
So if we acquired new REO properties
between the time you ran the report
and the second time you ran the re-
port, it would change.
They are very good at developing
operational reporting, answering how
many widgets do I have right now. But
where they lacked was being able to
answer how many widgets did I have
yesterday? It didnt capture a lot of
history and we didnt develop a lot of
nightly snapshots.
A corporate data warehouse where
I can run a report that says the same
thing for the auditors, who always want
to look at the book of business at a spe-
cifc point in time. Its very difcult to do
that in the systems at Fannie Mae. Fan-
nie Mae lacked a focus on that because
Freddie Mac felt the need to do that.
Dick Bottomley was our CFO and
who I reported to in 2000-2001, his
main focus was whos our most proft-
able customer, I need to know whats
going on at any minute of any day, as
well as provide reports to upper man-
agement on how we did the week be-
fore or month before. We developed a
lot of reporting to support that.
Im not so sure those same questions
are being asked at upper management
in the credit loss space at Fannie Mae.
They may have been in the loan origina-
tion side, but in Dallas, there was not a
consistent view of management report-
ing and there was not a focus to develop
a technology and database structure to
handle management reporting.
Transaction reporting was spot on,
but they didnt have a really good pro-
cess for knowing what caused it, what
happened and how do I compare over
diferent periods of time. Thats what
we developed when I got there.

Q&A
Continued from page 33
$-"44*'*&%4
Fer 6|ass|f|eds kates 866.75Z.7966
LENDlNG SUPPORT SYSTEMS MANAGER
Spokane, WA
ea u|y ||e yu
|eaes'| a e'|a| s||||s
e|aa|e '||| c
asy ee c ase ' e eee
.|s| JJJFG8E?<A:F4I<A:F6B@
e | c a|y
Lead Software Engineers
\A e|~ |u|s see|s ea ae
~|ees \|||~ |a| \ases
|us ys e eu|va|e e ua|
e us ||ue sae a||a|s ea|
esae |e|~ s|u|s ava a|e \A
'| |u avv| e esue
HR, REF# JC, MDAHRndasolutions.con
or 5300 Brandywine Farkway, 8uite l00,
Wilnincton, DE l9803
40 Mortgage Technology May 2011
040_MTMay11 7 5/6/2011 1:26:31 PM