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On the Attack: The GSEs Under Siege

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8 | Th e M Rep o RT take 5 M // In this new era of regulation and compliance concerns, how has the use of third-party vendors to manage risk and process in the origination space evolved over time? Grant // The evolution is fascinating, because we seem to have come full circle. Years ago, all verifications—such as, rental, employment, and income—were performed by the credit report- ing agency, not by the mortgage companies. This third-party verification process delivered a comprehensive mortgage credit report on each applicant. With the advent of auto- mated underwriting, most of the mortgage companies took these responsibilities in-house and went to a simple triple merge credit re- port. Then came the housing col- lapse of 2007-2008, and a portion of the blame for this disaster was blamed on the lack of indepen- dent third-party verifications. As a result, regulations were changed. Today, there is a checks- and-balances system in place to protect both borrowers and lenders. Third-party verifications are strongly recommended by all the GSEs and most lenders across the country. Using third-party vendors relieves the lender of a lot of liability, raises confidence in the results provided, and increases office efficiency. M // What is the biggest compliance challenge arising from the extensive regulatory oversight that has become a reality in the past few years? Grant // The biggest compli- ance challenge is adjusting to the new Ability-to-Repay (ATR) and Qualified Mortgage (QM) rules in order to prevent buybacks. With new regulations, lenders some- times feel like they are trying to fit a square peg in a round hole in order to ensure a borrower is compliant with requirements. In addition, lenders are required to vet all of their vendors by going to their site and doing a physical inspection, as well as complet- ing a two-to-three page checklist to ensure the vendor is handling everything properly. While this process is important to ensure the accuracy and reliability of the information provided, it is a time- consuming process for lenders. M // As the housing industry becomes more reliant on technology to streamline processes, what steps do you take to ensure the security of sensitive customer data? Grant // While no program is bulletproof, we do everything in our power to protect the confi- dentiality of personal data and the integrity of personal consumer information. We have a security plan in place as required by regu- lations. We maintain a secure net- work with firewalls and regularly monitor and test our networks for viruses and vulnerabilities. We are annually inspected by the three bureaus to make sure we meet their stringent requirements for a wide range of safeguards. We adhere to rigorous access-control requirements, such as background checks on all employees, drug testing, video surveillance of the servers, and biometric security access, which requires the user to present his/her fingerprint or other biometric to access the system. And in the event we should ever experience a data breach, we have a cyber-attack insurance policy to protect our customers. M // What is the next big step forward in the mortgage technology business? Grant // I think there will be several different steps forward in the mortgage technology busi- ness. A lot more automation will be introduced, and there will be increased usage of artificial intel- ligence in the loan process. More people will be using automated processes for verification of em- ployment, income, and deposit, as well as to protect against fraud and maintain quality assurance. We'll see more mobile apps for qualifications and other verifica- tions. We'll also see a greater movement toward staying con- nected with declined applicants and using programs to help them become qualification-ready. It's a way to capture more business; why spend the time and money to get applicants in the door, only to eventually tell them "no." M // Where do you forecast the housing market will be at this point next year? What factors are going to determine whether it grows or contracts? Grant // The MBA is currently predicting a 10-percent increase in mortgage applications next year. It is influenced by a number of factors, including employment, student debt, interest rates, and affordability of homes. Many col- lege graduates are kept out of the housing market because of student loans. The non-QM market offers a huge opportunity. New loan products and creative lending will help lenders match loans with reliable non-QM applicants. In this regulatory climate, accurate and dependable data is more important than ever. Steve Grant, president of Credit plus, joins us to discuss the business of delivering the information and services mortgage professionals need to make smart lending decisions. Forging the Path Ahead

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