One of the ways that servicers or investors can excise nonperforming assets from their portfolios is to try to put them back to originators by claiming fraud and/or breach of representations and warrants.   Potential malfeasance like this is uncovered via forensic audits, which have become increasingly popular since the mortgage crisis hit.  While forensic auditing for this purpose has typically been limited to institutions – investors, servicers, originators and mortgage insurers – the practice has now spread to the retail borrower, as described in today’s MortgageOrb article “When Forensic Loan Audits Are Used Against Lenders.”

This phenomenon has even touched Cogent.  Recently, we’ve been approached by a handful of clients to help them extract loan audit data from their Cogent systems for the purpose of forensic loan auditing.  Typically, this is in support of litigation in which opposing counsel requires every scrap of data that could be relevant.  Without a knowledge of both the mortgage quality control workflow and the application supporting it, this can be difficult for clients to accomplish on their own, especially after layoffs have reduced knowledgeable staff. 

Although projects like this are outside Cogent’s normal scope of work, we have the expertise to help clients.  More than anything, though, this is yet another reminder of why robust quality control is imperative in today’s world. 

Image: Dena M. Roudybush

Here’s a timely and relevant learning experience: Sheshunoff, an established publisher of financial information, is offering a webinar on February 23rd called “Mortgage Servicing from A to Z: What Every Mortgage Servicer Needs to Know“.

The blurb reads as follows: “With the continuing scrutiny on the mortgage industry and the ever-changing regulatory landscape, it is more important than ever for mortgage servicers to stay on top of the latest regulatory developments and industry trends affecting this volatile area. Join our interactive audio conference, Mortgage Servicing from A to Z, as our expert speaker gives you an insiders view into federal and state regulatory requirements, hot topics and best practices.”

The ‘expert speaker’ in question is Dena M. Roudybush, senior counsel for Compliance Counsel, PC a Virginia based law firm that is dedicated to serving the mortgage banking and financial services industries.

Cogent, for one, has seen tremendous activity in the mortgage servicing arena, with particular interest in servicing quality control.  This session sounds like a good way to get up to speed on the major changes taking shape.

At the launch of HAMP (Housing Affordable Modification Program), the Treasury Department and the Department of Housing and Urban Development (HUD) set as their goal the modification of 3m to 4m mortgages.  Through December 2009, approximately 850,000 borrowers had been placed into trial modification programs and 66,000 had been placed into permanent modifications.  Hardly a blistering pace.

We outlined some of the issues with the structure and deployment of the program in our HAMP Best Practices article published in the December 2009 issue  of Servicing Management magazine.  Mentioned in that article were the documentation requirements of the program, which slowed the process down.  In recognition of this, Treasury and HUD have released new requirements for upfront documents and guidance on permanent modification conversion.

Effective for all trial period plans with effective dates on or after June 1, 2010, a servicer can only evaluate a borrower for HAMP after receiving an initial package that includes a request for modification and affidavit (RMA) form; the Internal Revenue Service (IRS) 4506T-EZ form, which gives servicers the ability to pull the borrower’s tax return; and two pay stubs from the borrower for proof of income.

Said Herb Allison, the assistant secretary for the Treasury: ““We’re making it as easy as possible for homeowners to provide the documents. A lot of the problem of converting the trial mods to permanent mods has been time delay between the verbal communication about their eligibility to actually getting the documents and sending them in.”

Every little bit helps.

Image by Peregrine Blue 

As a consequence of the financial crisis, we are undergoing wholesale change in the regulatory environment of real estate finance.  The changes are coming hard and fast and continuously, making it difficult to establish and manage new business processes.  How do you keep up?

There’s no single answer to this question.  We have clients who take it on themselves to keep abreast of regulatory changes because they want full control over their regulatory compliance.  Other lenders want to outsource the management of change and turn to third parties to keep them up to date.

Wherever you fall in the spectrum, you will probably welcome any tools that ease the burden of staying current.  And such tools are cropping up.  For example, Wolters Kluwer has just launched “The Reg Z Center“, a free online resource which provides an overview of the changes affecting loans covered by Regulation Z, the effective dates for changes and suggested solutions for implementing changes.

Being a for-profit entity, the company does promote its compliance solutions on the site.  But this is in keeping with the ‘Web 2.0’ business model, whereby useful information is provided for free, interaction among interested parties is encouraged (via a forum, blog, or discussion group), and a long-term relationship is cultivated while simultaneously establishing credibility.

The Reg Z Center joins the company’s other similar resource centers for Fair and Accurate Credit Transactions (FACT) Act “red flags” and the Real Estate Settlement Procedures Act (RESPA).

It’s official.  Version 2.0 of CogentQC.NET has now been released.  You may have seen the news in Housingwire or MortgageOrb but if not, you can find the Cogent news release here.

2009 was an unusual year for client IT departments (unless it’s actually “the new normal”, God forbid.)  After the mortgage crisis and economic meltdown, it seemed like IT staffing and budgets were reduced and lenders were stuck in neutral, reluctant to take any steps other than cost-cutting.  IT staff had too many projects to handle and consequently Cogent saw only a handful of clients upgrading to CogentQC.NET.

However, the end of 2009 saw an acceleration of activity.  We now have enough upgrade projects to take us through the first quarter, at least.  And as business gets back to normal, we have even begun to talk with clients about enhancements to their systems that will automate and optimize more of their business processes.

It’s going to be a busy year.