From New Jersey Anthony Casa sent, “Your readers should know about The Association of Independent Mortgage Experts (AIME). It is an organization committed to empowering independent mortgage professionals and strengthening the wholesale mortgage channel to levels that haven’t been seen in the last decade. The association will centralize its mission on providing ‘independent’ mortgage experts – brokers, loan originators, processors and the like, who own or work for or in support of a company or entity that does not underwrite its own loans – with real tangible and financial value.
“AIME is 100% committed to independent mortgage experts, and it’s a solidified, organized solution to what mortgage brokers have been calling for, especially since the BRAWL movement made such big waves. There will be no confusion about the association’s agenda, in terms of ‘is it pro-broker or pro-banker?’ The purpose of AIME is to fight solely for independent mortgage professionals in as biased a way as possible, and to make sure they have what’s needed to double their business within the next three years.
“The association is operating with a growth-focused strategy, providing tools and resources to propel the wholesale channel beyond 20% share of the mortgage market by 2020. Thousands of supporters have already signed up for AIME. Part of that strategy is consumer-focused, as AIME plans to implement an aggressive branding campaign to rebrand mortgage brokers as ‘mortgage advisors’ in the public eye. The campaign will target homebuyers, realtors, builders, financial advisors and real estate attorneys to effectively tell the story of why independent mortgage experts are the best choice for getting a mortgage.
“’People have had a misinterpretation of our profession for years, and the goal of AIME is to shift that into a more positive light,’ said Marc Summers, President of Advantage Mortgage, who will serve as the President of AIME. ‘Independent mortgage experts are more than transactional middle-men that push money from Point A to Point B, they are true specialists in the mortgage field within their respective local communities. Just like financial advisors are trusted resources for families’ finances and investments, independent mortgage experts are that go-to professional advisor for borrowers and real estate agents.’”
Anthony’s note continued. “AIME will serve as a community-growing platform, cultivating idea-sharing among mortgage professionals nationwide, providing exclusive benefits to its members, and spearheading progressive legislative and social measures through continued advocacy and education. As such, AIME will dedicate a lobbyist in 2018 focused on issues impacting independent mortgage experts.
“Select AIME membership benefits will include recurring Regional and State multi-day training sessions designed to help independent mortgage experts build their business through hands-on training and consultation, discounted lead generation through major industry partner companies, talent development opportunities for loan originators and processors who support AIME members, a range of other discounted services, including Mortgage Educators and Compliance (MEC) training, and additional benefits are listed on the association’s website.
“AIME membership costs $79 annually and allows members to take full advantage of a variety of benefits. AIME Fuse 2018, the first official AIME event and national conference, will take place on Saturday, October 20, 2018 in Las Vegas at the Bellagio. The association is actively seeking sponsors and vendors for the October event, as well as members interested in joining the inaugural AIME community. For more information on the benefits associated with an AIME membership, and for wholesale-focused lenders and vendors interested in sponsoring AIME, visit www.AIMEGroup.com.”
Technology & cybercrime protection
“Rob, could you advise what you are hearing other lenders are doing to protect themselves against all of the cybercrimes that are on the rise?”
I turned to STRATMOR’s IT Advisory Practice Partner Len Tichy for a solid answer. “Cybersecurity and cybercrime are becoming a growing concern for all financial services firms every day, and not an easy one to deal with. It’s the kind of thing that takes preparedness, vigilance and a comprehensive program to assess vulnerabilities and mitigate the associated risks.
“In your role as Director of Risk Management I recommend that you take look at the Federal Financial Institutions Examination Council (FFIEC) Cybersecurity Awareness initiatives. You may already be aware of this organization and their Cybersecurity and Critical Infrastructure Working Group, but if not, I think you will find the material on the FFIEC website well organized and a great place to start: https://www.ffiec.gov/cybersecurity.htm. I work with a lot of CIOs and believe you will find that companies who are taking cybersecurity seriously look to the FFIEC as perhaps imperfect, but the closest thing we have to a gold standard.
“If you follow the above link, you will find a downloadable, comprehensive Cybersecurity Assessment Tool that we suggest our clients use to understand this growing threat, assess their current state, and develop a more robust program suitable for mortgage originators like Supreme.
“To put the FFIEC into context, the Council is ‘… a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB), and to make recommendations to promote uniformity in the supervision of financial institutions. In 2006, the State Liaison Committee (SLC) was added to the Council as a voting member. The SLC includes representatives from the Conference of State Bank Supervisors (CSBS), the American Council of State Savings Supervisors (ACSSS), and the National Association of State Credit Union Supervisors (NASCUS).’
“The FFIEC tool can help you can address this risk management challenge on your own. Or, if you think you want help, STRATMOR can assist companies with a program to 1) evaluate their ability to protect itself and its customers against both current and anticipated levels of information security risk exposure, and 2) demonstrate that a qualified independent consultant (e.g., STRATMOR) has assessed the Company’s processes for identifying, managing, and mitigating information security risks in keeping with industry best practices.”
Lee Brodsky, President of Mortgage Banking Insurance, recommends cyber liability insurance. With an average $7 million loss, sounds worthwhile, although there are 60 carriers that offer it with no consistency in policies – so buyer beware. “Your readers should know that this insurance helps protect your firm from expenses and liability from the release of customer or employee personally identifiable information (PII).
“Policies may include prevention, education & planning, 24/7 breach response services, forensic investigation, crisis management & public relations, customer notification, credit monitoring, business interruption, data restoration, and liability provisions.
“In recent years attacks on small to midsize companies has increased. Hackers know these companies are less likely to have a data security plan in place, making them an easier target. Even more, it’s becoming easier for them to initiate attacks through automated malicious code that gains access to your system and sends back the data. Thanks to these unmanned attacks, they don’t need to expend much energy to attack smaller companies, making it more worth the effort.
“What are they seeking? Generally, PII: real names, home addresses, birth dates, and government ID numbers (social security, tax ID, driver’s license). This information gives the thieves flexibility. They can open countless credit cards in another person’s name. The hacker can also obtain fraudulent government IDs, apply for loans, commit health insurance or Medicare fraud, file for fraudulent tax refunds, resell the data, and more.
“Your readers should be aware of the Identity Theft Resource Center (ITRC) website which tracks breach information made publicly available.
“Lenders can protect themselves by first reviewing current processes and inherent risks. Some of the main questions to ask include what data do you store? Where is the data stored? What protections are in place? Is it backed up? What protections are in place for backups? Who has access? What devices are being used (computers, tablets, smartphones, printers, etc.)? Are they encrypted? What are your agreements with third-party vendors?
“Everyone should us strong passwords (10 characters with a good mix), password protocols, update aggressively, back up regularly, and educate their team. The biggest threat to a lender’s business is inaction.” Thanks Lee!
Rene Ballesteros, SVP of Operations and IT at Broadview Mortgage, highly recommends multi-factor authentication. Multi-factor authentication (MFA) is a method of confirming a user’s claimed identity in which a user is granted access only after successfully presenting 2 or more pieces of evidence (or factors) to an authentication mechanism: knowledge (something they and only they know), possession (something they and only they have), and inherence (something they and only they are).
Two-factor authentication (also known as 2FA) is a type (subset) of multi-factor authentication. It is a method of confirming a user’s claimed identity by utilizing a combination of two different factors: 1) something they know, 2) something they have, or 3) something they are. A good example of two-factor authentication is the withdrawing of money from a ATM; only the correct combination of a bank card (something that the user possesses) and a PIN (personal identification number, something that the user knows) allows the transaction to be carried out.
KnowBe4 offers a free test that you can provide your employees to improve phishing knowledge and awareness.
Taxes, lending, and the budget
Friday’s commentary noted, among other things, that the tax law plan that was passed hit citizens of the United States, and that the interest deduction on home equity debt is eliminated. This is any debt that is secured by a qualified residence other than acquisition debt.
An article in Forbes points out that, “…unlike the deduction for interest on primary mortgages, home equity deductions are disappearing for both new and existing borrowers. No one will be grandfathered: all home equity loans will become more expensive in 2018.”
But, “…A close reading of the final language rushed through Congress last month reveals that interest-deductible HELOCs and second mortgages should still be available to homeowners provided they qualify on two criteria: they use the proceeds of the loan to make “substantial improvements” to their home, and the combined total of their first mortgage balance and their HELOC or second mortgage does not exceed the new $750,000 limit on mortgage amounts qualified for interest deductions.”
Sure enough, several readers were kind enough to write in saying things like, “The comment about home equity debt not being deductible is contrary to the opinion of my CPA. If it is used substantially to improve the property it is still deductible up to the allowed limits.” And, “Home equity lines used for home improvements will continue to be tax deductible. You will need to show all the dollars went to home improvement.”
Although Section 11043 of the new tax law eliminated home-equity debt interest deductions, it left virtually untouched interest deductions for primary home mortgage debt (“acquisition indebtedness”) that is used to buy, improve or construct a new home. As long as you follow the rules on what constitutes a capital improvement — spelled out in IRS Publication 530 — and do not exceed the $750,000 total debt limit, it is deductible.
The Trump budget was released this week. One can debate the odds of it passing intact (very, very low), but it provides a guide as to where the Administration’s priorities are centered. Jeff B. observes, “Also hidden within the proposal, and a bit of a surprise to the MBS market, was the proposal to increase the FNMA and FHLMC’s g-fee from 10bp to 20bp from 2019 to 2021 and extend the 20bp fee through 2023. The White House estimates that the increase will generate $26bn over the 10-year budget window while claiming it will level the playing field with the private sector. The increase would also slow conventional premium speeds on the margin while further dampening G2/FN swaps.
“This would be very concerning if there was a strong chance of the budget getting passed. The budget (as a whole) probably does not have much of a chance, but I would think that the Republicans would like this idea to pay for some of the tax cuts. Looks like a mortgage tax to me. When a GFEE of under 20 bps worked in normal underwriting times I would think a GFEE of 70 would create a great deal of revenue.”
Yes, companies continue to design robots and artificial intelligence. Some of it, like this 45-second video, is very unnerving.
Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Servicing: All It’s Cracked Up to Be?” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.
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