America's real estate industry combines government and private activities. Lenders often assert that public policy needs to support housing--such as by keeping interest rates low--while at the same time reducing regulatory burdens.
But relying solely on government initiatives to overcome market imbalances, boost confidence and jump-start demand won't yield satisfactory results. Our industry is healthiest when appropriate regulatory supervision is combined with a healthy dose of innovation by private companies that understand market needs.
For instance, some home builders are reducing housing costs by using factory-made modular components when possible, rather than totally constructing on-site. Another example of innovation, is a new homeowners insurance policy being rolled out by Home Value Insurance Co., Columbus, Ohio, which protects consumers against losses on property sales.
Yet another example ol private efforts to solve industry concerns is offered by Comergence Compliance Monitoring LLC, Mission Viejo, California. President Greg Schroeder notes that ongoing due diligence on third-party originators isn't mandated by government regulations. Yet studies have shown incidents when mortgage brokers who have lost their state licenses have continued selling loans to wholesale firms, he adds.
Lenders keep reporting high levels of mortgage fraud on seasoned loans, according to suspicious activity reports (SARs) data from the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN).
"Reports of mortgage fraud in the U.S. surged by nearly 88 percent in the second quarter of this year" compared with 12 months earlier, states The Wall Street Journal. More than four-fifths of that activity occurred more than two years ago, the Journal notes.
Reduced costs and faster turnaround are possible when lenders outsource part of the broker approval and monitoring process, claims Schroeder. Otherwise, he says, lenders must increase or reduce the number of workers performing those functions as market conditions fluctuate.
Lenders are interested in seeing profit-and-loss statements (P&Ls) and balance sheets on potential brokers and correspondents, Schroeder adds. Affiliate companies such as escrow firms also are identified, and any loan quality-control reports are included in the information Comergence puts together. Regulatory sanctions and lawsuits against broker candidates are compiled as well.
Schroeder says lenders are looking for previous criminal activity or current financial strains that could encourage an originator to commit fraud. Ongoing surveillance of public records allows Comergence to alert lenders if, for instance, one of their brokers files for bankruptcy. …