Mar. 2: Notes on common sense technology selection; blockchain, cybersecurity; state lending laws keep changing

Technology, cybersecurity, non-QM, and state residential lending law changes… they ain’t going away, so you may-as-well have some learnin’!

Being smart about technology, blockchain, and cybersecurity

M sends, “I want to add my $0.02 to your Saturday commentary. I have worked in mortgage technology for about 15 years now and my last couple years have focused in digital mortgage. I talk about adoption a lot with companies, and I agree with a lot of what is shared below. There has to be something said though about how this industry buys technology whether it be for digital mortgage or the other umpteen number of components that go into the loan manufacturing process. I know every company is different with different backgrounds, different resources, different policies, cost constraints, etc., etc. I, however, see a lot of companies go through evaluation processes without really understanding why they’re buying and what they’re buying. Again, I understand sometimes it’s a cost thing. Some companies want to check the box and buy the cheapest solution. Some companies follow the shiny object and don’t realize the larger picture or what actual business problem they’re trying to solve. And then you’ll have the companies that have been doing things the same way because its worked in the past and expect to continue to have the same results. I can go on and on.

“On the topic of originator tools and productivity, I just want to put an emphasis on the procurement process because that contributes to adoption and productivity issues throughout the entire mortgage origination process whether that be upfront or downstream in operations, secondary, and servicing. There are too many providers that are fly by night, don’t deliver what they sell, and are simply vendors rather than partners. There are absolutely commoditized areas in this industry where a vendor can suffice, but there are many more that require a partner and a more rigid procurement process to sort through which is which.

“Again, this is just my $0.02. Maybe some general standardization can be helpful. At the end of day, I encourage all lenders (IMBs, banks, CUs, etc.) to really dig deep into value and aligning the service provider’s vision with your business goals. Doing nothing is not an option. Doing the wrong thing sometimes can have even higher opportunity costs.

Analysis of 2018 regulatory filings by Securities and Exchange Commission Commissioner Robert Jackson Jr. shows about 90% of known cyberattacks on public companies went unreported, despite SEC guidance on when and how such attacks should be disclosed. Calling for an enhancement, with specific rules on disclosure and reporting, Jackson told a conference, “I think that sort of clear, bright-line guidance would be helpful to the market.”

Premium Title released a white paper, “Blockchain Disrupting the Title and Settlement Industry: A Practitioner’s View”. The white paper provides the benefits of a blockchain solution and the obstacles to overcome for blockchain to change how title insurance and settlement activity is performed within the real estate industry.

A JPMorgan Chase research report outlines developments in blockchain and cryptocurrencies during 2018 and offers varying views from analysts about the potential of blockchain technology. The report concludes that distributed-ledger technology “by itself has great potential to simplify and speed up transactions and information transfer” but that researchers are “not convinced that its real value lies in its first foray into the world of currencies”.

HSBC’s use of a blockchain platform has decreased the cost of settling foreign exchange trades by 25%, says Mark Williamson, chief operating officer of FX cash trading and risk management. “We’re able to demonstrate that this is not a one-off proof of concept or just one or two trades,” Williamson says.

Blockchain technology could help investment firms reduce fees linked to clearing and settlement by $12 billion, according to an IHS Markit report. Blockchain had a $1.9 billion effect on the financial sector in 2017, and the report estimates blockchain revenue will hit $462 billion by 2030.

SafeChain completed the digital conversion of Perry County, Ohio’s deed transfer and conveyance process between the engineer and auditor. Beginning January 7, the Perry County Engineer’s office will be able to digitize property deeds before the inspection and mapping process. Moving forward, each deed will receive a digital stamp backed by blockchain for added transparency and security, eliminating the need for physical authorization. The deeds will then be electronically transferred to the county Auditor’s office for conveyance. Perry County marks another successful public-private partnership in which SafeChain has worked with local government officials to utilize the latest technology to transact property more efficiently. Its previous endeavors also include its commercial wire fraud product, SafeWireTM. With the completion of the Perry County project, SafeChain has, for the third time, leveraged blockchain to positively impact the real estate transfer process, representing significant progress on Ohio’s goal to transfer all real property using blockchain.

Equator, provider of residential loan default software and marketing solutions for many of the country’s top servicers, real estate agents and vendors, announced the launch of a mortgage servicing blockchain solution. Through an agreement with Factom, Inc., the Factom® Harmony blockchain-as-a-service (BaaS) platform is integrated into the Equator® PRO software-as-a-service (SaaS) solution. The addition of Factom’s Harmony provides Equator customers the opportunity to incorporate the recordation of data, documents and key audit events onto Factom’s blockchain solution. Factom’s Harmony provides options for individual loans to be tracked as individual chains of data on the blockchain. This design allows Equator PRO customers the option to embed blockchain preservation into their various workflows, allowing for an immutable and encrypted blockchain audit record to be built for each loan and each workflow step.

If you’re near Seattle, the Washington Mortgage Bankers Association is offering up “Blockchain & Disruptive Tech in Real Estate” on March 7th. “We will explore which technologies will have the earliest and largest impact on real estate with a special focus on blockchain and artificial intelligence.”


This note from TheLender’s Cory Tona. “Your readers might enjoy this article by non-QM expert Brian Filkey. Entering the NON-QM channel is scary for most lenders, but more and more are getting in every day. This article helps shed some light on most common problems so lenders can be better prepared. Information like this should be shared so we can create a better and more responsible lending platform for all.”

State law changes keep on keepin’ on

The Nevada Secretary of State has adopted a temporary rule effective immediately, concerning electronic notarizations. The first section of the adopted rule pertains to definitions such as “electronic notarial certificate,” “electronic notarization solution,” “identity proofing,” and “solution provider.” The subsequent sections lay out the requirements for registration as an electronic notary.

The New Jersey Department of Banking and Insurance has issued a bulletin setting out the maximum principal amount for loans that may be considered “high-cost home loans” under the New Jersey Home Ownership Security Act of 2002.  The adjusted dollar amount is in effective for loan applications received on or after January 1, 2019.

New Jersey Home Ownership Security Act of 2002 requires an annual review and adjustment, if necessary, of the maximum principal loan amount that may be considered a high-cost home loan in New Jersey.  The adjustment is based on the housing component of the national Consumer Price Index, which measures the average change in housing prices over time.

When the Act originated, the maximum principal amount was set at $350,000.  By the end of 2017, this amount had increased by 39.32% to $487,618.86, which was set as the high-cost threshold for 2018 loans.  Then, as of November 16, 2018, the Consumer Price Index had indicated an increase of 42.46% since 2003.  Accordingly, the New Jersey Department of Banking and Insurance has adjusted the definition of “high-cost home loan” to state that the maximum principal amount of a loan that may be considered a high-cost home loan in New Jersey is $498,610.00.

Rhode Island Department of Business Regulation has recently adopted provisions that provide a series of licensing requirements for lenders, loan brokers, third-party loan servicers, and small loan lenders.

Regarding applications, the provisions state that all licensees are required to use the Nationwide Multistate Licensing System (NMLS) to apply for licenses, and to report all changes within thirty days of the change. Another licensing condition relates to required capital dependent upon when the license was granted. All licensees must also prepare and maintain a financial statement, prepared at a minimum on a quarterly basis, which evidences compliance with these net worth requirements.  Additionally, all licensees must also upload quarterly and annual financial statements under the Financial Statement Summary Section within the NMLS. provisions also cover bond requirements.

The provisions also require mortgage lenders and brokers to appoint a person who holds a valid Rhode Island Mortgage Loan Originator license as the qualified individual or branch manager designated to operate the licensed business. This individual is required to personally oversee the operations of the licensee and to ensure compliance with all applicable regulations thus must be physically present at the licensed location for the majority of operating hours.

Effective March 1, 2019, the Texas Real Estate Commission (TREC) adopts a new Third-Party Financing Addendum form (TREC NO. 40-8) that replaces the current Third Party Financing Addendum form (TREC NO. 40-7) as an addendum to be added to TREC contracts when there is a condition for third parry financing for all or part of the purchase price of the subject property (see 43 Tex Reg 7908 (12/07/2018) and revised 22 TAC §537.47)

Read the full memorandum on the Black, Mann & Graham LLP site.

The District of Columbia has passed the “Revised Uniform Law on Notarial Acts Act of 2018.”  The act includes new provisions that facilitate notarizations using electronic records, permit the notarization of signatures of parties outside the United States, and prohibits certain fraudulent or deceptive practices.

The act allows an individual who holds a notary public commission to apply to the Mayor for an endorsement as an electronic notary. Prior to receiving an endorsement, the notary is required to complete a training course, make the required oath, identify the tamper-evident technology the notary intends to use to complete the notarial act, and provide an exemplar of their electronic signature and official seal.

The act also provides for a series of prohibited acts. A notary public commission does not authorize an individual to assist persons in drafting legal records, give legal advice, or otherwise practice law.  Additionally, a commission does not authorize an individual to act as an immigration consultant or represent a person in a judicial or administrative proceeding. Further, a notary public who is not an attorney licensed to practice law in the District of Columbia may not use the term ‘notario’ or ‘notario publico’. The full text of the act is available for viewing.

Out in California Susan Milazzo from the California MBA let members know, “This year a proposal to institute a sales tax on services has once again been introduced in the California Legislature.  While there is little detail yet about the current proposal, we believe that the sales tax may target business services specifically with rates of up to 8% to raise as much as $10 billion a year in new revenue, based on past legislation.  We remain opposed to this tax but the issue has been discussed for years, largely by supportive press, editorial writers and policy wonks who view it as a key element of reforming California’s tax system to address the state’s notorious budget volatility.  Recently, Gov. Gavin Newsom has indicated tax reform is a top priority and has embraced a sales tax on services as part of that discussion.

“The California MBA has joined forces with other business groups to form the California Tax and Budget Research Project (CTBRP), which is now a coalition of organizations concerned about the impacts of instituting a sales tax on services in California. “Our mission is to protect and defend access to affordable credit for California’s real estate finance community, and the implementation of a sales tax on services, as described to date, would have a negative impact on the state’s housing/commercial real estate market.  In particular, access to affordable housing would be put at risk.

“We will keep you up-to-date throughout the year on the group’s efforts and progress, but I would strongly encourage you to consider attending our upcoming Legislative Day in Sacramento on March 18th, as we’ll be featuring a panel from the CTBRP, moderated by Jon Ross, one of California MBA’s legislative advocates. The panel will cover both the sales tax on services and commercial split-roll issues. You’ll hear real-time information and analysis on the sales tax on services, including any legislative proposals or bills. Click here to find out more about Legislative Day.

Seamus opens the newspaper and is shocked to see his OWN obituary. 

In a panic, he phones his friend and asks, “Did you see the paper?! They say I died!” 

The friend replies, “Yes, I saw it! So, where ya calling from?”

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Rob Chrisman