Decoding Compliance

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take 5 Proactively Positive Serving as ISGN's chief marketing officer has given Paul Imura a dynamic, global perspective on the marketplace, and according to his unique vantage, the mortgage industry's collective effort to conquer compliance entitles should give lenders more than cautious optimism. C redited with driving profitable growth for diverse financial services companies including Accenture, General Electric, and AIG, Paul Imura's enviable track record reveals his intellectual investment in housing finance—and its incredibly complex policies and processes. In teaming up with ISGN, Imura added to his expertise, and now, he's offering his robust perspective on the capabilities, compliance initiatives, and clear vision needed to succeed in today's mortgage marketplace. M // Nationally, what lending trends both positive and negative are you observing in the marketplace? Imura // Finally, we are starting to see some positive signs on the market recovery. Home prices are showing signs of improvement, which is mostly driven by dwindling inventory of homes. We hit a multi-year low at four months supply, which is down from nine months a few years ago. The basics of 14 | The M Report economics come into play with supply and demand, and it's refreshing to see home prices rise in many cities. Over time, home prices will continue to rise, as the U.S. population is adding an average of 3 million households per year. As a result, the demand will continue to increase, therefore increasing the price of homes. The housing market has always been an important driver in our economy, as it is the primary source of wealth for many families. Another positive sign is the decrease in delinquency rates. For example, at the end of 2012, 10 percent of mortgages were delinquent or in foreclosure. This will continue to decrease due to the fact that new originations have lower risk factors, such as fixedrate mortgages, low interest rates, and fully documented borrowers. The hangover from the housing crisis may linger, but we are starting to see light at the end of the downward cycle. With all the lessons learned from the housing crisis, we won't see the compound risk factors in our mortgages for many years to come. Regarding negative trends, there is widespread consensus that originations will decrease in 2013. In 2012, the housing market experienced a record number of refinances, which increased about 75 percent from the previous year. As rates fell from 4 percent to 3.5 percent, about 6 million households refinanced their mortgages. As rates are expected to rise above 4 percent in the next 12 months, we will definitely see refinances slowing down. Overall, I'm cautiously optimistic on the housing recovery. M // Among the wide array of policy and regulatory issues within the financial services sector, what key concerns are at the forefront for ISGN and its clients? Imura // Compliance continues to be a key client focus, with an emphasis on CFPB rules, QM, QRM, and Basel. With nine regulators in our market, there is definite institutional oversight to our lending partners. Being non-compliant in today's market has stiff consequences, including financial penalties. The intent of regulatory changes is clearly designed to protect the endconsumer. The biggest concerns are how to be compliant and at what cost, both operationally and financially. M // What new initiatives are emerging within the company to address these issues? Imura//ISGN recognizes that not all clients have the same resources to be compliant, and adding fixed costs in today's volatile market may not be the best solution for our clients. By tapping into our internal network of industry experts, ISGN can help design customized solutions for its clients. Last year, ISGN developed a compliance solutions group that works directly with lenders on a wide spectrum of services. One thing for sure is that over time, compliance will have a heavy technology flavor in loan origination software, servicing, and other platforms. M // What opportunities for growth do you anticipate during the year ahead as the industry makes strategic changes in response to the shifting economic environment? Imura // Our industry outlook is fairly positive for this year, as our addressable market has more than $17 billion of potential revenue in our space. Given the industry focus on cost containment and capital creation, our industry helps transform mortgage lenders. Lenders understand that ISGN's domain expertise, plus its global delivery model, results in a powerful value proposition. We reduce operating cost, improve precision, and enable our clients to focus on their key challenges. Our 2013 growth opportunities are clearly compliance solutions and technology products. ISGN provides a wide spectrum of products that serve the entire mortgage loan lifecycle, from origination, to servicing, to default management, including analytics. We are in a unique position where we don't have to start from scratch in building our portfolio of technology capabilities.

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