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Cogent Selected for HW Tech100 List of Most Innovative Technology Companies

March 3, 2015 By Kaan Etem

Cogent is pleased to announce that we have been selected by Housing Wire for its 2015 HW Tech100 list of the most innovative technology companies in the housing economy. Over 250 nominations were received by the judges, who whittled the list down to the select 100. Of that 100, 60 were returning winners from last year and 40, including Cogent, were new inductees. We are honored to be included in such impressive company. As always, we will seek to continuously improve our technology in collaboration with our clients.

Here is how Housing Wire describes the HW Tech100:

Compliance Humor

December 1, 2014 By Kaan Etem

So many industry professionals have been wrestling with it in 2014 that “compliance” may have become the industry’s word of the year. The jury’s still out but it’s never too early to joke about it.

Happy holiday season!

How Not to Be Fooled by Odds

October 15, 2014 By Kaan Etem

The New York Times ran an article recently titled “How Not to Be Fooled by Odds” in which the author defines what is meant by a statement such as “the odds of a Republican takeover of the Senate is about 74%.” Stating that “there really is a difference between saying something will almost certainly happen and saying that it is more likely to happen than not,” the author goes on to explain what is and is not meant by the statement. Concluding that “…a prediction that puts a 74 percent chance on an outcome should be “wrong” about 26 percent of the time,” he presents a list of situations that occur about 26% of the time, including:

The odds that a National Football League defense prevents a first down on third-and-one.
The percentage of full-time graduate students in electrical engineering in this country who are American citizens
The percentage of mothers with children under 18 who stay home with their children
The share of Americans who live in California, Texas or New York

In the same way, we need to be careful about what is actually being asserted by other statistics. For example, in the third year of California’s drought, we are quite focused on rain. So what is meant by the statement “There is a 40% chance of rain” (technically, the PoP or ‘Probability of Precipitation’)? Consulting the National Weather Service, we find the following:

Mathematically, PoP is defined as follows:

PoP = C x A where “C” = the confidence that precipitation will occur somewhere in the forecast area, and where “A” = the percent of the area that will receive measureable precipitation, if it occurs at all.

So… in the case of the forecast above, if the forecaster knows precipitation is sure to occur ( confidence is 100% ), he/she is expressing how much of the area will receive measurable rain. ( PoP = “C” x “A” or “1” times “.4” which equals .4 or 40%.)

But, most of the time, the forecaster is expressing a combination of degree of confidence and areal coverage. If the forecaster is only 50% sure that precipitation will occur, and expects that, if it does occur,it will produce measurable rain over about 80 percent of the area, the PoP (chance of rain) is 40%. ( PoP = .5 x .8 which equals .4 or 40%. )

In either event, the correct way to interpret the forecast is: there is a 40 percent chance that rain will occur at any given point in the area.

As you present your quality control findings to others, be sure that everyone understands what they mean. A clear definition of your terms at the beginning or end of any report is a good first step.

FHFA Director Watt Signals Shift in Plans for Fannie and Freddie

May 19, 2014 By James Robinson

The threat to Fannie and Freddie appears to be over.

Mel Watt, the Director of the Federal Housing Finance Agency, announced in a speech last week at the Brookings Institution that he plans to maintain the role played by Fannie Mae and Freddie Mac in the housing finance market. We think this is good news for the housing recovery, and also good news for those involved in risk management in the mortgage industry.

fannie-freddie-under-the-gun — Illustration courtesy of Forex Trading Portal

The housing industry recovery has been hampered by the uncertainty about the future role of Fannie and Freddie, and the pending legislative initiatives designed to unwind them. With that legislation now apparently stalled, and with Watt’s statements about supporting a continuing role for the agencies for the foreseeable future, the housing market should be lifted by the prospect of greater clarity and stability in the near term.

For risk managers in the mortgage industry, who have been tasked with implementing the myriad changes required under the new FHFA regulations imposed on lenders and servicers, the stability provided by this shift in policy toward Fannie and Freddie should be welcome. For decades, the agencies have been a primary source for risk management guidelines for the industry, and the threat of their demise – and the uncertainty about what would replace them – was a big added worry that can now be put on the shelf.

Link to May 13 Wall Street Journal blog post: https://blogs.wsj.com/economics/2014/05/13/six-takeaways-from-mel-watts-speech-on-housing/

Link to May 14 New York Times article: https://www.nytimes.com/2014/05/14/business/Melvin-Watt-shifts-course-on-fannie-mae-and-freddie-mac.html?hpw&rref=business

Creating Audit Checklists

March 27, 2014 By Kaan Etem

As a vendor of risk management tools for loan quality and compliance, Cogent’s focus is on developing effective software solutions that accommodate the needs of different types of lenders. Our software automates and optimizes business processes, while our clients, together with their legal and compliance departments, decide what kinds of audits they need to perform based on their business lines.

However, Cogent is occasionally asked for references to useful information in creating audit checklists. The Tools & Resources section of our website provides this sort of information, including links to FNMA, FHLMC and HUD quality control guidelines. In this post, we briefly mention two new sources of information:

FNMA Loan Defect Categories

This list shows the loan defects, by categories, identified by Fannie Mae in post–purchase review of their acquisitions. These defects (which may be eligibility violations [i.e. subject to repurchase]) are referenced in reporting to lenders on the quality of their deliveries. These defect categories can become the basis of a lender’s audit checklist structure. A link to this loan defect category document is included among other useful links on FNMA’s Loan Quality web page, which we recommend bookmarking.

Mortgage Compliance magazine

This relatively new publication offers substantive and in-depth coverage of issues for “legal, regulatory compliance, risk management and quality assurance professionals.” In addition to monthly issues, the publication also publishes weekly ‘newslines’, one of which recently offered a high-level approach to determining what CFPB rules and regulations apply to your organization. Cogent will shortly be a contributor to this publication.