A PROCLAMATION: COMPENSABLE SERVICES FEE

COMMENTARY by JONATHAN FOXX

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group.

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country and pioneers in outsourcing solutions in regulatory compliance.

Published in the September 2010 Edition of National Mortgage Professional Magazine.

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I have published an article that I think you'll want to read. The article provides the rationale for introducing a new term, which I have named the Compensable Services Fee, to replace the term Yield Spread Premium. The article is written in the form of a Proclamation.

As you may know, I have lectured on and written rather extensively about the Yield Spread Premium, for example:

• A New Era of Mortgage Reform - Part II: Legislation - Reactive or Proactive (September 2010 Edition)

• Landmark Financial Legislation: New Rules for Mortgage Originators -Part I: Reformation and Regulations (August 2010 Edition)

• New RESPA Reform Rule - Overview (January 2010 Edition)

• Service Release Premium vs. Yield Spread Premium: Match or Mismatch? (August 2009 Edition)

• Saving the Yield Spread Premium (July 2009 Edition)

• Yield Spread Premiums: Compensation or Kickback? (June 2009 Edition)

ALL THESE ARTICLES CAN BE FOUND HERE and were published in National Mortgage Professional Magazine, the mortgage industry's leading national magazine.

Now that the Yield Spread Premium (YSP) has gone the way of nature, and a credit has taken its place, perhaps it's time to make sure that the public understands that the credit, in whole or in part, provides payment for goods and services that the mortgage broker has actually rendered.

Or, to be blunt about it: notwithstanding politics and negative publicity, there is no RESPA Section 8 "kickback" when a mortgage broker actually furnishes and provides those goods and services and the compensation is reasonably related to the value of the goods and services actually furnished and provided!

The new Good Faith Estimate, which became effective January 1, 2010, reflects the change from YSP to credit.

But does the mortgage loan applicant actually know what the credit actually pays?

I am pleased to share this article with you. Special thanks to National Mortgage Professional Magazine for the opportunity to publish this Proclamation.

Lenders Compliance Group provides expert guidance in all areas of mortgage compliance.

If you are not yet a client, shouldn't you become one?

We are the first full-service, mortgage risk management firm in the country, and pioneers in outsourcing solutions. It would be a pleasure to support all your regulatory compliance needs.

If you have questions about this matter or would like assistance with mortgage compliance, please contact me at any time.

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Excerpt

Because the Yield Spread Premium is effectively gone from disclosure and the credit is to be used to partially or fully pay for the mortgage broker's services, a new term should be used to assure the public of the unique purpose of that credit, with respect to the goods and services actually provided by the mortgage broker.

Consequently, I would like to offer a new term to the industry to help assure the public's positive perception of the critical role played by mortgage brokers.

Behold my PROCLAMATION of a new term:

Compensable Services Fee!

A PROCLAMATION
CONCERNING
THE NEW TERM
"COMPENSABLE SERVICES FEE"
TO DESCRIBE COMPENSATION
EARNED BY MORTGAGE BROKERS
IN
RESIDENTIAL MORTGAGE LOAN TRANSACTIONS

Please read the PROCLAMATION and pass it around, so that mortgage brokers may explain to loan applicants, for educational and promotional purposes, that the compensation for their services are legitimately earned, legal, critical, and necessary to residential mortgage loan originations.

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LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FHA: WEBINAR - Sponsored Originations, HECM, FHA Connection

On September 28, 2010, the Federal Housing Administration (FHA) held a webinar, entitled Sponsored Originators, HECM Saver, and Other FHA Connection Changes, Effective October 4, 2010, subtitled "Sponsored Originators and Other Upcoming Modifications."

The webinar was well attended and topped out at over 650 participants. Indeed, the day before the webinar HUD-FHA notified the public that registrations could no longer be accepted due to space limitations.

The purpose of the webinar was to provide an overview of FHA Connection enhancements to support Sponsored Originations, including the Sponsored Originator Maintenance page, key case processing changes, and B2G & TOTAL Scorecard modifications. Also discussed were the HECM Saver, new ADP Codes, and the new Property Title Information section added to the Appraisal Logging screen of FHA Connection.

Because the webinar presentation was proscribed on a limited basis and would only be available for a short period of time to participants, we have downloaded it in order to make it available to you.

Highlights

Subjects Covered in the Webinar

• Mortgagee Letter 2010-20

• Mortgagee Letter 2010-33

• Sponsored Originators

• Sponsored Originator Maintenance Page
• Key case processing changes through FHA Connection
• B2G & TOTAL Scorecard Modifications
• New Data Collection on Form 92900-A

• New Appraisal Logging Data Fields
• HECM Saver

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Visit Library for Issuance

HUD-FHA Webinar: Sponsored Originators, HECM Saver, and Other FHA Connection Changes, Effective October 4, 2010
September 28, 2010

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LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

Dodd-Frank Act - Part II: Legislation - Reactive or Proactive

Commentary by Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group.

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country and pioneers in outsourcing solutions in regulatory compliance.

Published in the September 2010 Edition of National Mortgage Professional Magazine.

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In the wake of the recent financial collapse, the mortgage industry finds itself today faced with a blizzard of new regulations. There are reformist politicians who advocate for these new regulations, giving forth an apologetic that rival the reasoning of the most eloquent, ancient rhetoricians; and, there are politicians who condemn these same, new regulations, proclaiming that the prior existing regulations should have been (but were not) enforced, and that interposing new regulations in a deteriorating economy only adds to the industry's already hefty and costly regulatory burden.

The "Wall Street Reform and Consumer Protection Act," known as the "Dodd-Frank Act" (Act), is the federal government's response to the financial collapse, offering financial reform of the financial system in general, and to the mortgage industry in particular. It has been legislated into law at a time when fear pervades politics and the economic climate continues to worsen, with high unemployment, an eroding tax base, a swelling budget deficit, trillions of dollars in debt, and increasingly compressed corporate profit margins.

The Act hopes to provide that salvific safety, certainty, and stability that will calm our fears. But it is legislation that reacts to events past, and it is not necessarily proactive about possible events that may yet transpire. Financial bubbles, after all, exist due to the blindness of market participants, not their foresight.

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This new article, the second article in a 3-part series that dissects the landmark financial reform legislation now known as the Dodd-Frank Act, is entitled Part II: Legislation - Reactive or Proactive, A New Era of Mortgage Reform.

In this article, I summarize certain salient aspects of the Mortgage Reform and Predatory Lending Act (Mortgage Reform Act). It is a primary component of the Dodd-Frank Act and requires careful review and analysis in order to implement properly. And, I provide a matrix of the Mortgage Reform and Predatory Lending Act, with respect to the minimum standards for mortgages.

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LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

Fannie: Launches EarlyCheck™ - Prior to Closing

EarlyCheck™ is a new web-based program that provides lenders with access to Fannie Mae Loan Quality Initiative (LQI) delivery data checks at any point in the lender's business process. The goal is to help lenders identify potential problems prior to loan delivery.

The initial offering of EarlyCheck has these access options:

• Support for loans prior to closing: weekend of September 25, 2010, two new EarlyCheck access options were implemented.

• An integration solution that can be directly integrated with a lender's LOS

• A Web-based user interface

• Support for loans in post-closing through the pre-delivery stage: effective with the July 26, 2010 Loan Delivery Release Notes, lenders access EarlyCheck data checks via the Loan Delivery system.

EarlyCheck has its own web page at eFannie.com that contains all the information needed to get started, including Registration, Release Notification, Additional Services, Resources, Training and Education, and Support.

The Early Check facility responds in real-time, and Fannie claims it offers loan-level results in a user-friendly report or data file. Findings contain messages that highlight the issues that need to be resolved (i.e., failed checks), the corresponding delivery severities, and key result data (including key calculated values and the standardized property address for the subject property).

For DU loans, the findings also show a comparison of the input loan data with the data used in the most recent DU submission, as well as key DU Underwriting Findings information.

There is also a new management reporting capability that assists lenders in monitoring usage of the EarlyCheck access options for loans prior to closing and help identify recurring potential eligibility and/or data quality issues that may need to be addressed.

We have been keeping you up to date on Fannie's LQI developments, guidelines, and requirements.

For more information and documentation, please visit eFannie's LQI web page.

Highlights

Identify Potential Data Issues

• Helps identify potential data issues early in the loan process, when they can be remedied more effectively through:
  • Fewer delivery stops and corresponding financial and operational impacts;
  • Less manual error resolution during the delivery process and post-purchase;
  • Reduced funding/pooling delays resulting from delivery issues.

Process Points Access

• At any point in their processes prior to delivery:
  • Underwriting
  • Prior to loan closing
  • Prior to funding correspondent loans
  • During post-closing and secondary marketing process

Supports Various Underwriting Methodologies

• Desktop Underwriter (DU)

• Manually underwritten loans

• Non-DU AUS loans.

Checks

• DU Compare (comparison of input loan application data with the data used in the most recent DU submission)

• SSN checks

• Occupancy checks

• Address checks

• Unit number checks

• DTI checks

• Loan limit checks

• Required delivery fields

• Other basic eligibility and data integrity checks.

The initial release does not include:

• Product eligibility checks (loan terms, mortgage insurance coverage, Etc.)

• Customer contract and commitment pricing checks

• Pooling rules

Access Options

• Via the Loan Delivery system to support loans in the post-closing stage. Users can import a Fannie Mae 2000-character delivery file, run the checks, and view or download the results.

• EarlyCheck access options to support loans prior to loan closing include:
  • An integration option that can be directly integrated with a lender's LOS via a DU-like integration solution (i.e., it takes a 1003 flat file or MISMO AUS 2.3.1 file as input and returns viewable results and/or a result data file).
  • A Web-based user interface that enables a user to import loan data in a 1003 flat file format (which can be exported from most loan origination systems) or the MISMO AUS 2.3.1 file format, run the checks, and view the results.

Visit Library for Issuance

EarlyCheck™ FAQs, July 29, 2910
EarlyCheck™ Release Notification, July 29, 2010
Loan Delivery Release Notes, July 26, 2010

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LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

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Fannie: Introduces Second Lien Modifications

On August 13, 2009, the US Department of Treasury (Treasury) published Supplemental Directive 09-05, introducing the Second Lien Modification Program designed to work in tandem with the Home Affordable Modification Program (HAMP). The Supplemental Directive 09-05 was revised on March 26, 2010.

HAMP and the Second Lien Modification Program (which is named "2MP") are meant to create a "comprehensive solution to help borrowers achieve greater affordability by lowering payments on both first-lien and second-lien mortgage loans."

On September 21, 2010, Fannie issued Announcement SVC-2010-14, which introduces its Second Lien Modification Program and provides guidelines to Fannie servicers.

All Fannie Mae-approved servicers must participate in the program for all eligible Fannie Mae second-lien mortgage loans and must implement the 2MP program no later than January 1, 2011.

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Highlights

Modification Eligibility

• Borrowers in Bankruptcy

• Coordination with Other Making Home Affordable Programs

Modification Process

• Matching Second Liens to HAMP First Liens

• Reliance on First-Lien Data

• Standard Modification Steps

• Compliance with Applicable Laws

• Borrower Communication

• Trial Period Requirements

• Borrower Response

• Effective Date of 2MP Modification

• Reclassification or Removal of MBS Mortgage Loans Prior to Effective Date of Modification

• Borrower Notice

• 2MP Modification Documents

• Assignment to MERS

Use of Suspense Accounts and Application of Payments

• Monthly Statements

Reporting Requirements

• Reporting to Fannie Mae Through HSSN

• Reporting to Treasury

• Reporting to Credit Bureaus

Mortgage Insurers

• Mortgage Insurer Approval

• Reporting to Mortgage Insurers

Fees and Costs

• Servicing Fees

• Late Fees

• Administrative Costs

Incentive Compensation

• Servicer Incentive Compensation

• Borrower Incentive Compensation

• Re-default and Loss of Good Standing

Compliance

Record Retention

Transfers of Servicing

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Visit Library for Issuance

Fannie: Home Affordable Modification Program:
Introduction of Second Lien Modification Program
SVC-2010-14
September 21, 2010

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LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FHA: Issues FHA Connection Update for Sponsored TPOs

In my article, entitled FHA Issues Guidance for Lender Approvals (July 2010, National Mortgage Professional Magazine), I discussed the many changes that would be required pursuant to Mortgagee Letter 2010-20.

This ML, issued on June 11, 2010, outlines some of the most important revisions that HUD-FHA has made to its single family loan origination program and contained the long-awaited guidance regarding the implementation of its Final Rule. That Final Rule adopted changes pertaining to the approval of mortgage lenders by the Federal Housing Administration (FHA) that are designed to strengthen FHA by improving its management of risk.

If your organization has not drafted and begun implementing policies and procedures to comply with Mortgage Letter 2010-20, I highly urge you to do so immediately.

After December 31, 2010, loan correspondents (i.e., Third-Party Originators, so-called "TPO"s) will only be permitted to continue participation in FHA programs by establishing a sponsorship relationship with an FHA-approved mortgagee. Indeed, loan correspondents will no longer have access to non-public FHA systems, beginning January 1, 2011 (i.e., FHA Connection). Only FHA-approved mortgagees will be permitted to order FHA case numbers from the FHA Connection. HUD will provide future guidance, with respect to the processing of case numbers ordered prior to the January 1, 2011.

Mortgagee Letter 2010-33 has been expected. It describes the system enhancements to FHA Connection, providing notice to mortgagees who are sponsors ("Sponsoring Mortgagees') of sponsored third party originators ("Sponsored Originators") of new FHA Connection data submission requirements as was announced in Mortgagee Letter 2010-20.

For transactions originated by an FHA-approved loan correspondent, mortgagees should follow the current process through December 31, 2010.

FHA Connection enhancements will be implemented on October 4, 2010, and sponsoring mortgagees must begin complying with the new data entry requirements on that date.

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Highlights

EFFECTIVE DATES

On or After October 4, 2010

• All required sponsored origination data fields must be completed on assigned case numbers assigned.

• Sponsoring mortgagees will no longer enter their 10 digit FHA ID in the FHA Connection as the loan originator for loans involving a sponsored originator, as previously advised in Mortgagee Letter 2010-20, as a temporary workaround pending this system enhancement release.

• For mortgagees using B2G (FHA Connection Business to Government) that are unable to modify their systems to accommodate the transmission of the Employer Identification Number (EIN) by October 4, 2010, the FHA Connection Case Number Assignment screen must be used to order a case number for sponsored originator transactions.

• The modified HUD/VA Addendum to the Uniform Residential Loan Application (92900-A) is required for all applications.

Until January 1, 2011

• For loan originations not involving a sponsored originator, FHA mortgagees may use the prior version of the 92900-A (dated 5/2008) until January 1, 2011.

As of January 1, 2011

• The FHA-approved loan correspondent program will no longer be available, and B2G mortgagees must comply with new systems requirements to support collection of sponsored originator data. Only FHA-approved entities will have direct access to FHA Connection.

SYSTEM AND SCREEN CHANGES

• New Sponsored Originator Maintenance Screen Modified Case Number Assignment Screen

• Modified Case Transfer Screen

• Modified Insurance Application and HECM Insurance Application Screens

• Modified Case Query Screen

• Viewing Sponsored Originator Performance in Neighborhood Watch

• FHA TOTAL Scorecard Changes

FORM CHANGE AND NEW SIGNATURE COMPLIANCE

HUD/VA Addendum to Uniform Residential Loan Application (92900-A)

• Modified on page 3 to capture necessary information for sponsored originators, as follows:
  • Loan Origination Company - Entity's Legal Name of the originating mortgagee
  • Loan Origination Company Tax ID -- Employer Identification Number issued by the Internal Revenue Service (IRS)
  • NMLS ID of the Loan Origination Company - The unique identifier of the company, if licensed with NMLS

• For those loans originated by a sponsored originator, the sponsoring mortgagee must enter its name and address in block 15 on pages 1 and 3. Directly below block 15 on page 3 are the new fields the mortgagee must enter for capturing the sponsored origination information described above.

• The revised form 92900-A (dated 9/2010) must be used for all loan applications taken by a sponsored originator on or after October 4, 2010.

• For loan originations not involving a sponsored originator, FHA mortgagees may use the prior version of the 92900-A (dated 5/2008) until January 1, 2011.

Uniform Residential Loan Application

• On the Universal Residential Loan Application (URLA), the actual interviewer's name, signature and telephone number must appear on page 4, regardless of who employs the interviewer (e.g., a sponsored originator).
• While common practice in the industry is for the interviewer to also sign page 1 of the 92900-A, if a sponsored originator is involved, it is now required that the sponsoring mortgagee must sign and date page 1 of the URLA.

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Visit Library for Issuance

FHA Connection Enhancements to Support
Sponsored Third Party Originations (Sponsored Originations)
Mortgagee Letter 2010-33, September 21, 2010

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FHA: Announces HECM SAVER Program

On September 1, 2010, we notified you in a Compliance ALERT [FHA's "HECM Saver" - Uncorroborated (9/1/10)] about the uncorroborated reports concerning HUD-FHA's new HECM Saver program. At the time, there was no direct confirmation yet from HUD regarding the new HECM Saver: no Press Release from HUD, no statement from HUD in the Federal Register, and so forth - only, as of that writing, rumors and hints. However, we continued to monitor this matter closely and promised to provide the actual HUD-FHA issuance, including guidelines, when and if the new HECM Saver is offered.

We now have corroboration in the form of Mortgagee Letter 2010-34 (9/21/10) of this second option in HUD-FHA's Home Equity Conversion Mortgage (HECM) Program.

The new HECM Saver is a second initial mortgage insurance premium (MIP) option, for the purpose of lowering upfront loan closing costs, for mortgagors who want to borrow a smaller amount than what would be available with a "HECM Standard."

Effective: On or after October 4, 2010, mortgagors may select either HECM Saver or HECM Standard as an initial MIP.

Highlights

Initial and Monthly Premiums

• For HECM Saver, the initial MIP will be 0.01 percent (0.01% or 0.0001) of the maximum claim amount (MCA), and is collected at time of loan closing. For HECM Standard, the amount of initial MIP will continue to be 2 percent (2% or 0.02) of the maximum claim amount, which also is collected at the time of loan closing.

• MIP for both HECM Saver and HECM Standard will be charged monthly at an annual rate of 1.25 percent (1.25%) of the outstanding loan balance.

Availability of HECM Saver and HECM Standard

HECM Saver and HECM Standard are available for:

• all HECM transaction types (traditional, purchase and refinance);

• all five payment plans (tenure, term, line of credit, modified tenure and modified term);

• all interest rate indices (Constant Maturity Rate and London Interbank Offered Rate);

• adjustable rate mortgages (monthly and annual); and

• fixed interest rate mortgages

Initial MIP Calculation for Refinance Transactions

For all refinance transactions, mortgagees and counselors must use the formula below to determine the amount of initial MIP due for both HECM Saver and HECM Standard.

Formula:

1. New MCA multiplied by new initial MIP (%) = New MIP

2. Old MCA multiplied by old initial MIP (%) = Old MIP

3. Subtracting the result of (2) from the result of (1) yields the MIP amount owed to HUD

Other Areas Covered in Mortgagee Letter

• Principal Limit Factor Table
• FHA Connection Case Number Assignment Screen Changes
• Pipeline of HECMs
• Adaption of Legal Documents

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Visit Library for Issuance

Home Equity Conversion Mortgage Program -
Introducing HECM Saver
Mortgagee Letter 2010-34, September 21, 2010

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

CFPB: First FEDERAL REGISTER Issuance

COMMENTARY: by Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.

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A new era in residential mortgage loan originations has now begun with the issuance of the announcement of a designated transfer date for transferring specific enumerated authorities from the purview of other agencies to the Consumer Financial Protection Bureau.

Our firm has issued Mortgage Compliance Updates and Compliance Alerts relating to the mortgage reform act. We have also opened a new section in our Library for the CFPB, and if you want to read the legislation, that too is available in our Library.

And, as many of you know, I have written extensively on the new mortgage reform legislation and will continue to do so.

You might want to read the following articles, all published in the National Mortgage Professional Magazine, the nation's highly respected magazine devoted to mortgage banking:

• The Birth of an Agency: Consumer Financial Protection Agency
  • (September 2009 Edition)

• The CFPA Controversy: Asking the Tough Questions
  • (October 2009 Edition)

• Landmark Financial Legislation: New Rules for Mortgage Originators - Part I: Reformation and Regulations
  • (August 2010 Edition)

• NOTE: Part II - forthcoming this month in the September edition. Part III - forthcoming in the October edition.

On September 17, 2010, President Obama appointed Elizabeth Warren as an Assistant to the President and a Special Adviser to the Treasury Secretary, with responsibility to establish the CFPB.

Elizabeth Warren was not named the first Director (a five year post that requires Senate confirmation). Given her unique abilities, and the support of the President and Treasury Secretary, there is every reason to believe that she will bring insight, energy, and fairness to the position entrusted to her.

Overview

On September 20, 2010, the very first issuance regarding the Bureau of Consumer Finance Protection (CFPB) was published in the Federal Register.

In accordance with the Consumer Financial Protection Act of 2010 (CFP Act), the Secretary of the Treasury, Timothy Geithner, designated July 21, 2011 as the date for the transfer of functions to the CFPB.

On July 21, 2010, the President signed into law the CFP Act (i.e., Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act). Section 1062 of the CFP Act, in relevant part, requires the Secretary to designate a single calendar date for the transfer of functions, under section 1061, to the CFPB.

Therefore, on the ''designated transfer date'' of July 21, 2011, certain authorities will be transferred from other agencies to the CFPB, and the CFPB will be able to exercise certain additional, new authorities under the CFP Act and other laws.
Henceforth, we will be tracking CFPB announcements and issuances as well as any Treasury issuances pertaining to the CFPB.

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If you have any questions about this matter,

please email me.

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Highlights

Orderly and Organized Start-Up

• Congress contemplated that the lead time for the ''orderly implementation'' of the CFPB's functions could range between 6 to 18 months after the date of enactment.

• To fulfill the statutory goal of an ''orderly and organized startup'' of the new agency, the CFPB should be provided a reasonable period of time to develop its operations and organization prior to the transfer of functions and employees from other agencies.

• A transfer date of July 21, 2011, 12 months after the date of enactment, will provide the CFPB an appropriate period of time to hire and assign employees to support its new functions, as well as to plan and make important decisions necessary to build a strong foundation for the new agency.

Functions of the CFPB

• On July 21, 2011, the ''consumer financial protection functions'' currently carried out by the Federal banking agencies, as well as certain authorities currently carried out by the Department of Housing and Urban Development (HUD) and the Federal Trade Commission (FTC), will be transferred to the CFPB.

• As of July 21, 2011, the CFPB will assume responsibility for consumer compliance supervision of very large depository institutions and their affiliates and promulgating regulations under various Federal consumer financial laws.

• Within 90 days after July 21, 2011, the transfer of certain employees from six of those agencies to the CFPB must also occur.

• Effective July 21, 2011, new authorities of the CFPB under subtitle C of the Act, as well as other consumer protection provisions, will become effective.

Intervening Period

• In the intervening period, the CFPB will lay the groundwork for an efficient transfer and prepare for consumer protection activities after July 21, 2011.

• For instance, prior to July 21, 2011, the CFPB will:

• begin to conduct research relating to consumer financial products and services,
• develop its nationwide consumer complaint response center,
• plan and take steps to implement the risk-based supervision of non-depository covered persons, and
• prepare for the opening of outreach offices.

• Development of the supervision program for certain non-depository covered persons is particularly significant because no Federal agency previously has had the responsibility of supervising these entities, such as payday lenders, mortgage companies, debt collectors, and consumer reporting agencies.

• Prior to July 21, 2011, the CFPB will begin building the supervision program, including hiring and training examination staff and making preparations necessary to begin a risk-based supervision program.

The CFPB will also work during the intervening period to prepare for the new authorities that will transfer or take effect as of July 21, 2011, for instance by planning the orderly integration of bank, thrift, and credit union examiners from five different Federal agencies and preparing for rulemakings required under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Visit Library for Issuance

CFPB: Designated Transfer Date
Federal Register, Vol. 75, No. 181
September 20, 2010

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FHA: Multifamily Changes and Proposals

On September 17, 2010, FHA Commissioner David H. Stevens issued a letter in which he discussed various new risk management requirements involving FHA's multifamily housing programs, initially introduced on July 7, 2010.

The changes are meant to update underwriting policies, increase lender and underwriter quality, and align loan application, review and approval standards.

We highlighted these changes in our Mortgage Compliance Update (FHA: New Oversight of Multifamily Risk: 7/7/10).

In this most recent letter, Commissioner Stevens indicates that other additional Multifamily initiatives are underway.

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If you have any questions about this matter,
please contact Jonathan Foxx, Managing Director.

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Highlights

Heightened Standards for Lender and Underwriter Qualifications

• All new and existing multifamily lenders and underwriters will undergo an additional screening process to insure that they are qualified and experienced before receiving approval to participate in specialty insurance program. A separate approval will be required to offer the agency's more complex insurance programs, such as those for new construction, substantial rehabilitation and Low Income Housing Tax Credits.

Time Frame: Qualifications will become effective later in the Fall, through the issuance of a mortgagee letter.

Update to the Multifamily Accelerated Processing (MAP) Underwriting Guide

• Will be updated and revised to incorporate all Mortgagee Letters, Housing Notices, and administrative guidance that have been issued since it was first published, along with new chapters on affordable housing underwriting and environmental requirements and expanded chapters on market studies, commercial income and mortgage credit analysis.

Time Frame: New MAP Guide is expected in January 2011.

Standardization of Underwriter's Narrative and Application File Contents

• To assure critical analysis of the risks of proposed transactions by MAP underwriters, a standard underwriter's narrative will be used for applications submitted under all insurance programs. and also requiring a standard table of contents be used to organize application submission.

Time Frame: Lenders will be required to use the standardized forms on all new applications by January 2011.

Loan Committee

• A new loan committee approval process will align Hub and Program Center commitment authority and practice to ensure consistency in underwriting throughout the regional offices, as well as to provide a platform to share best practices. Loan committees at the Hub and National levels will provide oversight for most transactions in the multifamily insurance program, depending on loan size and a project's number of units.

Time Frame: The notice implementing the Hub and National Loan Committees was issued in early August and became effective this month. The National Loan Committee has begun operating and has a regularly scheduled weekly meeting. The HUB Loan Committees will begin operating later this month.

Multifamily Credit Watch

• An objective, point-based system, based on one in use by Single Family, will track multifamily lender performance, material violations of FHA underwriting standards and the rate of loan defaults and claims paid. Under the new Multifamily Credit watch monitoring system, each lender's underwriting and loan performance will be compared to that of all other lenders in the MAP program. Based on that review, lenders may be placed on probation, suspended or could have their approval terminated.

Time Frame: The Multifamily Credit Watch system will be published as a proposed Rule for a 30-day comment period later this month. After comments are received, a final Rule will be issued by the end of this year.

Visit Library for Issuance

FHA Commissioner David H. Stevens, Letter
September 17, 2010

LENDERS COMPLIANCE GROUP is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

Short Sales: Fraudulent Practices

According to Nolo's Plain English Law Dictionary, a Short Sale is: The sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Short sales usually occur when the homeowner is facing foreclosure. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what is owed. While this definition obviously does not tell the whole story or the legal process issues, it is correct in a broader sense. For example, the overall intent is to avoid foreclosure and the fees attendant thereto; but, the Agreement between the borrower and the lender does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, which is known as the "deficiency." Extinquishing the remaining balance must be clearly stipulated in any acceptance. Lenders in particular have been increasingly affected by fraudulent practices on the part of various types of companies. Many state banking departments and certain federal agencies have come out with notices for lenders to be aware of schemes and scams to defraud. One of the most recent such notices comes from the California Department of Real Estate (DRE). This state agency has been consistently proactive in many areas in the fulfillment of its mission of consumer protection, advocacy, and licensing enforcement. Therefore, we are providing the DRE's recent notice, entitled "Short Sale Fraud Alert September, 2010: Update to DRE Issued Consumer and Industry Alert(s) Regarding Short Sales Fraud, and Related Issues." We think the notice is useful as a means to better understand the scope of fraudulent practices involving short sales. Also issued by the DRE is a letter to lenders from Jeff Davi, California Real Estate Commissioner, entitled "Short Sale Fraud Warning For Lenders, Servicers, GSEs, and Other Mortgage Owners and Investors (referred to collectively as "Lenders"and individually as "Lender"), and subtitled "A Time for Collaboration and Cooperation." Virtually all incidents of short sale fraud involve the knowing failure to disclose material information to the short sale lender. As a result, lenders are approving sales based on false or omitted information. _______________________________ If you have any questions about this matter, please contact Jonathan Foxx, Managing Director. _______________________________ Highlights Short Sale Flipping: one of the major and recurring schemes is short sale flipping, where real estate agents and brokers have defrauded a short sale lender with respect to the value of a property and purchase offers received, and then, in turn, resold the property for a much higher price. These types of scenarios usually involve a false appraisal or broker price opinion (BPO) that was provided by the listing broker to the short sale lender with the intent of under pricing and falsely stating the value of property. Undisclosed Addenda: in some cases there is an addendum to a purchase agreement that contains conditions of the sale and agreements made between the buyer and seller that are not submitted to short sale lenders with the original purchase contract. One type of addendum that has recently surfaced is one wherein the buyer agrees to pay for the alleged service of a short sale negotiator. Whereas the closing cost credit to the buyer is or may be eventually disclosed and approved by the short sale lender, the ultimate payment of that credit to a third party is not. These payments to short sale negotiators often are not divulged on the HUD-1 statement until after the short sale lender has approved all of the terms and the transaction has funded and closed. Non-recurring closing costs: in agreements wherein sellers are crediting buyers with so-called non-recurring closing costs. This credit is then used by the buyer to pay a fee to the short sale negotiator. Whereas the closing cost credit to the buyer is or may be eventually disclosed and approved by the short sale lender, the ultimate payment of that credit to a third party is not. These payments to short sale negotiators often are not divulged on the HUD-1 statement until after the short sale lender has approved all of the terms and the transaction has funded and closed. Marketing Properties: the DRE is investigating transactions where listing brokers are indicating in their advertisements that only offers where buyers request a non-recurring closing cost credit from the seller to pay for the short sale negotiator fee will be submitted to the short sale lender. Undisclosed monies and credits outside of escrow: occur where buyers and/or sellers are receiving undisclosed monies and credits outside of escrow. These types of disbursements might also be made possible and facilitated by the escrow company handling the transaction. Visit Library for Issuances Short Sale Fraud Warning For Lenders, Servicers, GSEs, and Other Mortgage Owners and Investors (referred to collectively as "Lenders" and individually as "Lender"), A Time for Collaboration and Cooperation, DRE California September 13, 2010 Short Sale Fraud Alert September, 2010, Update to DRE Issued Consumer and Industry Alert(s) Regarding Short Sales Fraud, and Related Issues, DRE California, September 2010 Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

Appointing a Director to the CFPB

Commentary: by Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.

Many clients and colleagues have asked me why it is that a Director for the newly legislated Consumer Financial Protection Bureau (CFPB) has not been appointed by this point. After all, the financial reform legislation became the law of the land on July 21, 2010. It is now over two months later and there is still no appointment to that post.

The reason for the delay can be given in one word: politics.

At this point, there really is no excuse for the usual cover story that explains such delays - "getting it right" in finding the most qualified person.

Would you think that the person is qualified who actually initiated the concept of the CFPB and has advocated for its implementation all along - before the politicians got their hands on the idea? Would somebody who has been a consistent public voice for consumer protection advocacy be qualified?

How about an individual who has published numerous scholarly articles, and teaches contract law, bankruptcy law, and commercial law at Harvard Law School - and has taught law at several top law schools - is that a decent enough credential? Indeed, somebody whose legal expertise and experience have led to being considered a nominee to serve as a Supreme Court Justice, for the position previously held by Justice John Paul Stevens (and now held by Justice Elena Kagan) - that kind of legal skill and integrity - would that qualify?

Given the "mortgage meltdown" and Wall Street's financial fiasco, what about choosing the person who actually is the chair of the Congressional Oversight Panel, charged with investigating the Troubled Asset Relief Program (otherwise known as "TARP," and otherwise known as the "Bailout")? Maybe somebody willing to challenge the U. S. Treasury Department's handling of the Bailout and demanding more accountability?

Maybe a mature person of 61 years of age, somebody who is not an ivory tower scholar, having grown up in Oklahoma, attended non-Ivy League colleges, and received a JD from Rutgers University? Think about a person who has been the Vice President of the American Law Institute as well as a former Sunday School teacher.

That person is Elizabeth Warren.

Only one problem: politics. Inscrutable politics.

For instance, the retiring Senator Christopher Dodd (D-CT), who led the Senate's work on the financial reform legislation, has been making statements that indicate an unwillingness to understand or accept his own law. That law, eponymously named after him and his cohort in the House, Barnie Frank (D-MA), provides for an Interim Director, appointed by the Treasury Secretary - and the appointment does not require the Senate's approval. Yet Senator Dodd has said that such a power is not in the new law and the Senate's approval is required. Maybe he should read what he signed!

The Dodd-Frank Act's Title X, Subtitle F - "Transfer of Functions and Personnel; Transitional Provisions," Sections 1066 (a) and (b), inter alia, specifically state that the Treasury Secretary is "authorized to perform the functions of the Bureau" and may provide "administrative services necessary to support the Bureau before the designated transfer date" of the many regulatory authorities to it.

In other words, the Treasury Secretary runs the Bureau until such time as the Bureau runs itself as an agency within the Treasury, and therefore the Treasury Secretary has the authority to appoint an Interim Director. An Interim Director appointment would likely lead to a permanent Director position, but, given the spectacle of DC politics recently, that may also lead to yet another partisan blockade or filibuster.

So why not get started right now?

Meanwhile the public is waiting and wondering.

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So, What Do You Think?

I would welcome your comments and views.

Please feel free to email me at any time.

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Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FTC: Seeks Comments on Revised Disclosures

On August 27, 2010, the Federal Trade Commission (FTC) published for public comment revised versions of three documents required by the Fair Credit Reporting Act (FCRA). The FCRA requires the FTC to prescribe the content of notices that consumer reporting agencies must provide to those who furnish information to them and to those who obtain consumer reports from them.

The proposed revisions incorporate changes in rights and obligations created by several new rules issued pursuant to the Fair and Accurate Credit Transactions Act of 2003 (FACTA).

Under the FCRA, consumer reporting agencies (CRAs) are required to include a summary of consumer rights with every consumer report they provide to a consumer, and the FTC is required to provide a model summary of rights to be used for this purpose.

Comments: by September 21, 2010

If you have any questions about this matter, please contact Jonathan Foxx.

Highlights

Revisions and Updates

GENERAL SUMMARY OF CONSUMER RIGHTS

"Your Rights Under the Fair Credit Reporting Act"

• Furnisher Direct Dispute Rule: which took effect on July 1, 2010, allows consumers to dispute the accuracy of information in their consumer report directly with the furnisher of that information as well as the CRA. The proposed revised Summary of Rights reflects this additional dispute right, and also directs consumers to the FTC's website for more information about disputing consumer report errors.

• Federal Agency Contacts: the current Summary of Rights incorporates a list of Federal agencies responsible for enforcing the FCRA. The proposed revised Summary of Rights makes this information available on its website in a separate document that lists the Federal agencies responsible for enforcing the FCRA, along with their addresses, phone numbers, and website addresses, which can be updated more easily.

• Format changes: include revisions to improve the clarity and readability of the document.

NOTICE OF FURNISHER RESPONSIBILITIES

"NOTICE TO FURNISHERS OF INFORMATION TO
CONSUMER REPORTING AGENCIES:
YOUR OBLIGATIONS UNDER THE FAIR CREDIT REPORTING ACT"

• Furnisher Direct Dispute Rule: reflects the new duties of furnishers provided in the Summary of Rights.

• Furnisher Accuracy Rule: new duties contained in the Furnisher Accuracy Rule, which became effective on July 1, 2010, are outlined.

• Format changes: include revisions to improve the clarity and readability of the document.

NOTICE OF USER RESPONSIBILITIES

"NOTICE TO USERS OF CONSUMER REPORTS:
YOUR OBLIGATIONS UNDER THE FAIR CREDIT REPORTING ACT"

• Risk-Base Pricing Rule: effective January 1, 2011, the Risk-Based Pricing Rule requires users of consumer reports to provide risk-based pricing notices in certain circumstances or permits such users to provide consumers who apply for credit with a free credit score and information about their credit score.
• Address Discrepancy Rule: effective on January 1, 2008, requires the user to implement reasonable procedures to verify that the consumer report relates to the correct consumer.
• Medical Information Rule: effective on April 1, 2006, prescribes the circumstances under which creditors may obtain, use, and share medical information.
• Format changes: include revisions to improve the clarity and readability of the document.

Visit Library for Issuance

Summary of Rights and Notices of Duties
Under the Fair Credit Reporting Act
Federal Register, Vol. 75, No. 166, p 52655
August 27, 2010

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Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

FHA: Short Refinance Option

On August 9, 2010, we notified you of FHA's issuance of Mortgagee Letter 2010-23 (8/6/10), which announced the FHA Short Refinance program. We also provided Highlights of the product.

The Short Refinance concept was originally announced in March 2010. In our email we noted that the Short Refinance would be available on September 7, 2010, and will continue to be available until December 31, 2012. The Short Refinance is meant to offer an additional refinancing option for underwater borrowers.

On September 7, 2010, FHA announced the launch of the Short Refinance loan product.

This refinance program offers certain "underwater" non-FHA borrowers who are current on their existing mortgage and whose lien holders agree to write off at least ten (10%) percent of the unpaid principal balance of the first mortgage, the opportunity to qualify for a new FHA-insured mortgage.

This loan product is obviously targeted to help people who owe more on their mortgage than their home is worth - also known as being "underwater" - because their local markets saw large declines in home values.

Participation in FHA's Short Refinance program is voluntary and requires the consent of all lien holders.

If you have any questions about this matter, please contact Jonathan Foxx.

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Highlights

Eligibility

The homeowner must:

• owe more on their mortgage than their home is worth.

• be current on their existing mortgage.

• qualify for the new loan under standard FHA underwriting requirements.

The property must:

• be the homeowner's primary residence.

The first lien holder must:

• agree to write off at least 10% of their unpaid principal balance

The existing loan to be refinanced must:

• not be an FHA-insured loan.

The new refinanced loan must:

• have a loan-to-value ratio of no more than 97.75 percent and a combined loan-to-value ratio no greater than 115 percent.

Second lien holders:

• who agree to full or partial extinguishment of the liens receive incentives.

Servicers:

• must execute a Servicer Participation Agreement (SPA) with Fannie Mae on or before October 3, 2010.

Visit Library for Issuances

FHA Refinance of Borrowers in Negative Equity Positions
Mortgagee Letter 2010-23
August 6, 2010

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Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

OTS: Updates FCRA Compliance Exam

On August 31, 2010, the OTS updated Section 1300 of the OTS Handbook, which outlines FCRA compliance requirements reviewed in examinations. The OTS, the Office of the Comptroller of the Currency, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Trade Commission implemented the FACT Act changes through final rules that were effective July 1, 2009.

Section 623 of the Fair Credit Reporting Act (FCRA) was amended by the Fair and Accurate Credit Transactions Act of 2003 (FACT Act) to improve the way that institutions furnish information to consumer reporting agencies (CRAs) and handle direct disputes from consumers.

Section 1300 of the OTS's Examination Handbook contains procedures used by OTS examiners to assess compliance with the FCRA. The module on financial institutions as being "furnishers of information" (Module 4) has been revised to include the requirements of the new rules.

Furnishing information to CRAs is voluntary. However, under the new rules, institutions that do so must have policies and procedures for furnishing information with accuracy and integrity.

The rules also lay out the duties of institutions that receive disputes directly from consumers. The attached examination procedures address both of these areas.

If you have any questions about this matter, please contact Jonathan Foxx.

Highlights

Summary of Key Regulatory Provisions

Policies and Procedures

In developing the required policies and procedures, furnishers must:

• consider the guidelines that are in Appendix E to the rule

• develop policies and procedures that fit the institution's activities

• provide for reasonable investigations of disputes

• use standard data reporting formats

• maintain records for enough time to respond to direct disputes

• review procedures upon transfers of accounts to prevent re-aging of information

• periodically review and update practices and procedures for investigating and correcting information

• review and update their procedures periodically

Direct Disputes

• When a consumer disputes information reported to a CRA directly with an institution, the institution must conduct a reasonable investigation of a direct dispute if it relates to consumer liability on the account, the terms of the account, the consumer's performance, or other information in a credit report regarding the account with the furnisher that bears on the consumer's creditworthiness and reputation.

• When an institution receives a direct dispute, it must review all relevant information that the consumer provided and report investigation results to the consumer.

• If the institution finds that it provided incorrect information to a CRA, it must provide the correct information to each affected CRA.

• An investigation is not required if the institution determines that the dispute is frivolous or irrelevant and sends the consumer a notice within five days of making that determination.

• The notice may be on a standard form and must include the reasons for the determination and identify information that the institution needs to investigate the dispute.

Visit Library for Issuances

• Furnishing Information to Consumer Reporting Agencies and Direct Disputes Regulation: FCRA Examination Procedures, OTS Letter 363 (8/31/10)

• Regulatory Bulletin, RB 37-60, Handbook: Examination, Subject: Fair Credit Reporting Act, Section 1300 (8/31/10)

• Final Rule/Guidelines on Furnishing Consumer Information to Credit Reporting Agencies and Direct Disputes; and Advance Notice of Proposed Rulemaking (ANPR) Seeking Comment on Additions to Guidelines, OTS Letter 313, (7/17/09) .

• Guidelines for Furnishers of Information to Consumer Reporting Agencies, Proposed rule, Federal Register, Vol. 74, No. 125, pp 31529-31533 (7/1/09)

• Procedures To Enhance the Accuracy and Integrity of Information Furnished to Consumer Reporting Agencies Under Section 312 of the Fair and Accurate Credit Transactions Act, Final rules, Federal Register, Vol. 74, No. 125, pp 31484-31528 (7/1/09)

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FHA: New Credit Score and LTV Guidelines

On July 15, 2010, HUD issued a notice seeking comment on three initiatives that HUD proposed would contribute to the restoration of the Mutual Mortgage Insurance Fund (MMIF) capital reserve account. We provided a brief outline and a copy of that issuance in our Compliance Update, FHA: Proposes to Revise Underwriting Guidelines (7/16/10).

Today, September 3, 2010, HUD announced that it has completed its review and considered public comments. The issuance does not cover all three initiatives, but is limited to implementation of HUD's proposal to introduce a minimum credit score threshold and reduce the maximum LTV. The remaining two initiatives, involving (1) capping seller concessions, and (2) tightening manual underwriting guidelines, will be dealt with in a forthcoming issuance.

Effective Date: October 4, 2010

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Highlights

Credit Score and LTV Chart

The following chart outlines the changes in New Loan-to-Value and Credit Score requirements:

Minimum Credit Score

Borrowers will be required to have a minimum decision credit score of no less than 500 to be eligible for FHA financing.

LTV Requirements

The LTV for FHA-insured mortgage loans (purchase and refinance) will be limited to 90 percent for borrowers with a decision score between 500 and 579. Maximum FHA-insured financing (typically, 96.5 percent LTV for purchase transactions and 97.75 percent for rate and term refinance transactions) will continue to be available for borrowers with credit scores at or above 580.

Temporary Exemption for Refinances

FHA is providing a special, temporary allowance to permit higher LTV mortgage loans for borrowers with lower decision credit scores, so long as they involve a reduction of existing mortgage indebtedness pursuant to FHA program adjustments announced in HUD Mortgagee Letter 2010-23.

In accordance with Mortgagee Letter 2010-23, the current mortgage lender will need to agree to accept a short pay off, accepting less than the full amount owed on the original mortgage in order to satisfy the outstanding debt.

This exemption is applicable only to borrowers with credit scores between 500 to 579. Further, the exemption is applicable only to refinance transactions originated pursuant to Mortgagee Letter 2010-23 and closed on or before December 31, 2012.

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Visit Library for Issuance

FHA Risk Management Initiatives:
New Loan-to-Value and Credit Score Requirements
Federal Register, Vol. 75, No. 171
September 3, 2010

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Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.

Labor Day – 2010 in the Mortgage Industry

By Jonathan Foxx

Jonathan Foxx, former Chief Compliance Officer of two publicly traded financial institutions, is the President and Managing Director of Lenders Compliance Group, the first full-service, mortgage risk management firm in the country.

On Monday, September 6, 2010, we will celebrate Labor Day.

It is a time for reflection. Gone are the tolerance for a child labor workforce, 12-16 hour days, sweat shops, low and subsistence wages, employment discrimination, dangerous working conditions, management retaliation against employees, willingness to accept unequal pay for equal work, massive overtime without due and fair compensation, and preventing employees their right to assemble or form unions.

Our industry, the mortgage industry, has suffered greatly in the current economic environment. And on this Labor Day we should be mindful of the loss amongst our own ranks of members of our fine, professional work force.

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It was 1894 and the Pullman Strike had reached its zenith. Due to the panic of 1893, workers at Pullman's train building factories had their already low wages reduced or were downsized out of their 12 hour a day jobs. But Pullman also owned the town in which the worker's lived. Rents and municipal service charges were not also reduced. So workers saw their wages further reduced, or were laid off - but the town kept charging the same fees as if nothing had changed!

Strike broke out and workers around the country refused to handle or work on trains with Pullman cars. It was a show of solidarity that had hardly been seen before, not only by the members of the American Railway Union itself but also across many unionized and even non-unionized companies.

At its height, the Pullman Strike would embroil in this conflict the President, Grover Cleveland, the U S Supreme Court, U S Marshals, and the U S Army. Many strikers died or were wounded. Eventually, the strike was put down by the use of federal troops. Pullman agreed to divest its ownership of municipal services and towns. In the wake of the Pullman Strike, six days after the strike was broken, Congress unanimously signed Labor Day into law as a national holiday.

In the last few years, the mortgage industry has gone through a considerable downsizing of its own. Many mortgage originators have watched helplessly as their wages went down and employees were laid off. Entire companies shut down - some of them amongst the largest originators in the country - with virtually no advance notice to workers, leaving those employees stranded without jobs. Yet the cost of living did not change.

In many ways, the mortgage industry has been decimated. Even the industry associations that have been strong advocates have endured an attrition that has reduced their membership and, by extension, their lobbying clout. No group in the mortgage industry has been spared, including, of course, the compliance community. Recently, I founded a new association for the compliance community, the Association of Residential Mortgage Compliance Professionals (ARMCP), which will serve to support this particular group of industry participants. But the damage to the overall industry has been done, and it will take quite some time for a recovery to take place.

Yet I think it is important for us all to show solidarity with one another in pursuit of a stronger mortgage industry and a stronger country. If you are against wage, gender, race, age, or any other form of discrimination at work, then you are in favor of Labor Day. If you are against an industry's jobs and services being sent overseas, then you are in favor of Labor Day. If you are against the termination of unemployment insurance benefits at a time when there are six applicants for each job opening, then you are in favor of Labor Day. If you are against the federal government's withholding of stimulative ways and means to invigorate the economy, then you are in favor of Labor Day.

We do not live in a vacuum. People working are also people needing mortgages and the other products our industry offers. It is unreasonable to expect the mortgage industry to rebound as long as the economy itself does not substantially improve.

On this Labor Day - 2010, let's give some thought to the difficult times our colleagues have been going through - those who have lost their jobs through no fault of their own, those whose desk nearby is now vacant - and keep hope alive for them, wishing for their welcoming return soon to work.

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So What Do You Think? I would welcome your comments and views. Please feel free to email me at any time.

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of hands-on and automated services in residential mortgage banking.