Author: Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.
A couple of days ago, I wrote about some unintended consequences of the increase in government regulation on mortgage lenders. Recently, more and more banks are quickly moving away from FHA lending because of what they believe to be increased risk. Increased risk from the type of borrower involved, from the new Dodd-Frank rules and from FHA certification requirements. JPMorgan has just about eliminated all FHA lending (FHA Exodus). Other main banks are following suit. Wells Fargo recently announced they have increased the minimum credit score for FHA insured loans from 600 up to 640. In the world of credit scores, this is a big jump. This is not good for first time and low to moderate income homebuyers. This means that it may adversely affect all borrowers up the chain. This could stymie the so called “housing recovery.” But wait…it appears the Independent (non-bank) Mortgage Lenders are picking up the slack. At least for now, Independents have increased their share of the FHA lending. In doing so, they have also increased their share of the risks. What do the Banks see that the Independents do not? The risks are virtually the same; same Dodd-Frank rules, same FHA certification requirements, and the same borrowers. So, why do the Independents tread where others fear to go? Why do Independent Lenders believe they will succeed? Maybe, it’s that great entrepreneurial spirit which has always been a driving force behind the Independents’ success. Or, is it that here lies some low hanging fruit left behind by the Banks’ exodus? Either way, Independents need to be very careful when doing this lending. The rules have changed and the stakes are high. Problems, defects and/or rule violations may lead to severe penalties levied by CFPB, FHA and/or DOJ. This is serious business. If a lender is found to have violated FHA lending and insurance requirements, the lender may not only be fined but may also lose the privilege to originate FHA loans. That can be devastating to a lender that had modified its plans to increase their FHA business. All the more reason you must focus on “QUALITY.” This is the key word. Not just volume, but the origination of loans that will stand the test of time (and of course, a CFPB audit). Unfortunately heretofore quality has been overlooked in the interest of volume and profit. No more can lenders afford to manufacture poor, defect-laden loans. This will be their death knell. It may sound a little dramatic - but it’s true. Investing the money and time to train staff, implement systems and review loans to ensure quality and compliance will pay a lender huge dividends. Opportunity now exists for Independent Lenders to increase their FHA business. They can also make inroads with customers, being consumers, realtors and builders, to also get a crack at more conventional business. They must be compelled that any business is done the right way to ensure quality, compliance and loan performance. I don’t know if the Banks’ strategy to exit FHA lending is the right move, but I do know it presents some good opportunities with increased challenges for Independent Lenders. How they originate these loans and meet these challenges will determine their success. Trash or treasure; it’s all up to you.
Mortgage Compliance

Is One Man’s Trash – Another Man’s Treasure?

Michael Vitali / October 2, 2015

A couple of days ago, I wrote about some unintended consequences of the increase in government regulation on mortgage lenders. Recently, more and more banks are quickly moving away from FHA lending because of what they believe to be increased risk.  Increased risk from the type of borrower involved, from the new Dodd-Frank rules and from FHA certification requirements. JPMorgan…

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False-Claims-Act
Mortgage Industry Trends

Whistleblower Earns 5.15 Million

Michael Vitali / September 30, 2015

A recent settlement was made between the Department of Justice and Walter Investment to the tune of $29.6 million under a False Claims Act action. The whistleblower who brought the violations to the attention of the DOJ was paid $5.15 million as his share of this recovery (FCA Settlement). Nice pay day! This is important for two reasons; 1) in…

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Regulations-Enough-is-enough
Mortgage Compliance

Regulations: When is Enough, Enough?

Michael Vitali / September 28, 2015

According to The Community Home Lenders Association (CHLA), non-bank mortgage lenders seem to more regulated when it comes to consumer lending protections than their bank counterparts (Regulations). When is enough, a little too much? Since the crash of 2008, Congress has passed a whole bunch of new rules and regulations. Most of these are a result of the infamous Dodd-Frank…

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All-about-the-app
Mortgage Loan Quality

A Loan Is as Good as Its App

Michael Vitali / September 25, 2015

For many years, I worked for a large, successful luxury home builder located in the Pennsylvania area, which will remain nameless. One thing we all know is that a home is only as good as its foundation. Poor foundation equals a poor quality home. That builder is very successful to this day because their homes are built on a solid…

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Ginnie-Mae-Hurdles
Mortgage Compliance

One More Hurdle for Mortgage Lenders

Michael Vitali / September 25, 2015

As if the housing crash, more regulations, increased agency scrutiny and CFPB oversight didn’t create enough challenges for Independent Mortgage Bankers, along comes potential new Ginnie Mae increased cash and liquidity requirements (Ginnie Requirements). With Independent Mortgage Bankers taking a lead role as issuers of Ginnie securities, along comes a concern that such lenders may not have the financial capacity…

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Mortgage Compliance

TRID Uncertainty Drives Need for Enforcement Delay

Michael Vitali / September 22, 2015

With the TRID rules effective date just around the corner, the industry is pushing Congress hard for legislation to impose an enforcement moratorium. Lenders are concerned that honest mistakes/errors may take place as the result of the complexity of the new rules, the massive programming changes required for compliance, the exactness of the new forms and remaining uncertainty over implementation…

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