Scanners: Image or Text?

Dear Thor,
What is the difference between an image scanner and a text scanner?

An image scanner allows you to scan a document and read it later, but you can’t edit it. On the other hand, if your saved file is a text document, then you can change it. Even more important, you can do a word search. Let’s say you have all your files stored the traditional way. A prior client wants you to pull his note and see if there is a prepayment penalty. If you have your closed loans stored as text documents, then you can do a search for the client’s name and scan his note electronically, instead of going to the storage bin and looking through boxes.

Much the same as a copy machine, the more you are willing to spend, the more speed and flexibility you get. An example of the super high speed is the Kodak i840 that lists for over $50,000. For something mid range, you can get a text scanner for about $800. This would be a commercial rated flatbed scanner, versus the handheld pen style word scanners that sell for about $50. You can also buy software that can convert a saved image file to a text file for $100 to $200 dollars. This software is analogous to speech recognition software that converts voice to text.


Dear Thor,
What is open-source software?

You might think of open-source software as the next generation of freeware. It is free in the sense that not only the software itself, but also the source code that makes the software tick is openly available. This means that not only can you get a free copy of the software, but you can take the existing source code and build on it before passing it on to other users. Because everybody in the world has access to the code and the ability to expand and refine it, even if you’re not a programmer yourself, the software is destined to constantly improve. The software can be downloadable to operate on a computer or it can be an online program.

The open source model is proven to work: it spawned the operating system now called Linux. Another great example of how open-source software works is Wikipedia, the Internet-based encyclopedia. There are rules and procedures to follow, but anyone can add new information to the program. Or, when using the knowledge source, if you see something that is inaccurate or obsolete, you can edit or update the data. Not only does it keep growing, but it keeps getting better. And like open-source software, you’re free to copy and distribute Wikipedia articles if you include a copy of the license.

Much open source software available today is a workable alternative to expensive software. A prime example is the office suite. It has programs very similar to those in Microsoft Office. For instance, Writer is a word processing program and would be a counterpart to Microsoft Word. While they are similar, Writer has one distinct advantage: it can save documents in the Microsoft Word “.doc” format and in a generic format called OpenDocument. Word documents, on the other hand, can be saved only in the “.doc” file format, which might not be readable without a copy of Word. Other open source software programs available are Mozilla Firefox, which is a Web browser like Internet Explorer, and the GNU Image Manipulation Program (GIMP), which can replace Adobe Photoshop.


Dear Thor,
Why does my computer sometimes reboot itself?

If your computer is working normally, there are only two reasons for a reboot. One is when you initiate the reboot. This can be for several reasons. Some software installations require a reboot and part of the install routine will offer an option to reboot. This can be automatic if you have opted for automatic updates from Microsoft.

You might reboot simply because want to refresh your RAM (random access memory) by closing out partially running programs. Sometimes a program design flaw will cause what’s called a “memory leak,” where a program claims some of your computer’s memory for itself and then doesn’t give it back after it’s closed. Rebooting resets your memory, fixing the “leak.” Or, there could be a time when your computer freezes and a reboot is required. If it is so jammed that a normal restart won’t work, try holding down the on/off button.

The second reason for a reboot could be a result of a setting in your Control Panel that will automatically reboot your system any time your computer encounters an error. This is not a default setting and if it is turned on, I would turn it back off. Go to System, then Advanced. In the Startup and Recovery Settings you will see an option for Automatically Restart in the Recovery Settings. If it is checked, try deselecting it.

The EMortgage Transition

Major effort coordination will soon result in eMortgage transactions as the industry’s normal operating process. An eMortgage is done with as little paper as possible, ideally none at all. This requires major technology coordination, but many changes have already been put in place. The eMortgage is a growing and viable loan transaction method. Fannie Mae announced purchasing its 1,000th eMortgage.

When you can originate a loan, process a loan, underwrite a loan, and do all the other needed steps to market, record, ship, insure and store mortgage instruments without transferring paper from one place to another, the eMortgage will be upon you. Many hundreds have already been done. The eMortgage is no longer hung up on “if” questions. The only remaining question is “when?”

You can find critical technical information on the Internet at The eMortgage technical specifications and implementation guides provide a framework for implementing paperless mortgages with electronic signatures.  They provide links to all of the documents and work products of the MISMO eMortgage Workgroup, including:

  • SMART Doc(TM) Implementation Guide
  • SMART Doc(TM) Specification, DTDs and supporting information
  • ePackaging DTD, Specification and Implementation Guide
  • eMessaging DTD and Implementation Guide
  • Background information on eRecording, eMortgage Vaulting and the National eNote Registry concept (now the MERS eRegistry).

You may not be the technical wizard of your company, but you still need to read the eMortgage Guide final document for version 2.0. In fact, if you intend to remain in the mortgage origination business, you must read this 96 page document. It is available free as a PDF download from the above site. What will you learn?

You will discover what an eMortgage really is. You will learn what is involved with this process and will discover the benefits and cost savings you should expect to flow from the eMortgage process, all important points. As the eMortgage becomes the industry standard, you and your company must adapt to these changes or you will need to find a new career. How close is this transition? Best estimate is more than a few months, but not many more years. Adapting your technology, your work flow, staffing requirements and all the rest of the changes needed for an eMortgage environment will require time. It is not too late to do the needed planning, but it is getting late to start your planning if you are still just doing business as usual.

Page 7 of the eMortgage Guide identifies many of the expected benefits that will flow from using this technology. These include significant reductions in cycle time for all processes, increased data integrity, cost savings for system integration and increased value of eMortgage assets. Opportunities exist in many areas such as compliance, disclosure, closing, delivery, recording and servicing.

The current legal framework surrounding mortgage transactions must also evolve, and already has in many areas including passage of the Uniform Electronic Transactions Act (UETA) and the Electronic Signatures in Global and National Commerce Act (ESIGN). The details of these laws and the requirements to be met therein require review by your legal staff. However, understanding and correctly implementing these laws with your eMortgage process is absolutely critical.

Another important area is notarization of documents. While the foregoing acts each address this issue, the laws of each state currently set the regulations for notarization. These will need to be modified to enable electronic notary services. Many states are already working on the needed changes; however, enabling legislation will require some time to complete. You need to determine the situation in each state where you conduct business. Additional information can be found through state and national notary associations.

eRecording is another area with conflicting positions between federal and state laws. At present, you need to clarify the rules in your county and state as to whether eDocuments are eligible for recording. This is another area of change as the various states and counties move to enact appropriate legal support for the process. Legislation in the form of the Uniform Real Property Electronic Recording Act (URPERA), has already been adopted by some states, and provides for recording of electronic documents as originals and eliminates the need for a physical or visual image of the notary’s seal.

The American Land Title Association (ALTA) has a 16-page draft of a new loan policy available. The draft contains a number of references to electronic loan obligations designed to emphasize coverage that already exists in the current ALTA policy. Obviously title insurance is a critical part of every mortgage transaction. Therefore, you must become familiar with these requirements to ensure you will have the protection you need for each eLoan.

Consumer disclosure delivery via electronic means is also subject to regulation. You must obtain prior consumer consent to receive such disclosures. Also, some notices are not eligible for electronic delivery such as any notice of acceleration, repossession, foreclosure, eviction or right to cure relating to a credit contract secured by the consumer’s primary residence. The general laws concerning disclosure requirements are included with Regulation B and Regulation Z and in advisory letters from the Comptroller of the Currency. You will find more details beginning on page 17 of the eMortgage Guide.

Once clear of the legal hurdle sections, you get to the structure concepts of eMortgages. Standards for SMART™ documents are important to understand; not the technical aspects for managers and production staff, but the concepts. SMART is the acronym for Securable, Manageable, Archivable, Retrievable and Transferable electronic documents. In general, the document contains information describing the document, a visual representation of the document, data embedded in the document, transparent linking of the data and visual representation, electronic signatures in the document, tamper-evident security in the document and an audit trail of changes in the document. These are features not available with paper documents as there is no way to know or discover skillful changes to paper documents. In this instance, a SMART document provides superior security for each transaction.

The eMortgage guide starts with a high level overview of the general process. It then provides greater detail about specific critical topics necessary with the eMortgage concept, such as eDocs, eSignatures, ePackages, eRegistry, eDoc Delivery and the Electronic Vault. Section six reviews information concerning eDisclosure, eCredit Reports, eAppraisal and much more.

Like it or not, the eMortgage process is descending upon you. Your choice is to be prepared to adapt to these changes or to be crushed by them. What is absolutely certain is that the business is changing again. The benefits in time saved, superior service, superior transaction security, fraud defense and general efficiencies will drive these changes. Change is not new but constant. Be ready for it or join the dinosaurs.

By Bruce Forge

A Practical Approach to Office Data Security

Security of data in the mortgage industry is more than having an IT guy configure the router between your office and the Internet. In this article, we will review some basic suggestions on ways to protect your office and data from eavesdropping.

Start with Fundamentals
If you have an office of more than one individual, you have a built in potential for a security breach. Similar to the way that a secret cannot be kept if one person tells anyone else, security becomes compromised when multiple individuals have access to information we don’t want shared indiscriminately with others.

Securing data in our office has to be done for a number of reasons, some not so obvious. The most important reason for security is to protect the privacy of our clients, and to ensure that they do not find their identities and financial information compromised by a third party. Not only is it a business and ethical requirement to protect this data, there is another reason overlooked by many loan officers: it is required by law. In particular, we are required to protect the integrity of data transmitted electronically, be it by e-mail, the Internet, or within an office network.

But security is not just a matter of configuring and securing data on our computers and network. It starts with some common sense rules in the way we run our businesses.

Workplace Etiquette
One of my favorite issues is the way many individuals operate in a cubicle environment and leave their passwords written on a sticky note for others to see when they walk by. This is particularly amusing with a receptionist or other individual within easy access of a visiting delivery person or interviewee. We simply have to enforce an atmosphere in the office where we require people to take seriously the policies that are in place to secure information.

There should be an adequate and readily available paper shredder for any loan officer or processor with regular access to client documentation, so unwanted copies and notes may be effectively destroyed. Some offices are very loose on this topic, maybe providing only a single large shredder for use by key processing personnel. The bottom line is that if such equipment is not readily available, the office will soon get lazy about disposing of confidential documentation.

Finally, paper loan files should not be left out at night for prying eyes to see, and should preferably not be left open, but put away in file cabinets when the office is closed. It would not be too much of a stretch to suggest they be locked up after hours when regular mortgage personnel are not there.

Internal Computer Network Security
It is very much a universal truth at this point that a mortgage company will have a local area network to communicate between workstations and the central data repository—the server. It is relatively easy to secure this basic network from outsiders. The network is based on a wired connection between the workstations and the server, and unless this wire is intercepted physically by a third party, it is impossible to read the data circulating on this network. There are some very not so obvious ways for data to “leak” from this network without the network administrator or office manager being aware.

While it is now becoming uncommon to see a floppy disk drive on the typical office machine, it is very common to see a CD Writer or USB ports. The USB ports allow devices such as the mouse or keyboard to access the computer. Unfortunately, the advent of the USB Memory key also allows a person to copy massive amounts of data from the machine or network in only a few minutes, without the knowledge of anyone else in the office. I would highly recommend that any large retail operation highly restrict access to the network via these security holes. Machines may be ordered without CD Writers and USB ports can be disabled, allowing a mouse and keyboard only with the more traditional PS2 style connector on the back of the computer. USB ports should be allowed only by personnel who really have a need for such capability.

Wireless Internet Hubs
Many offices provide wireless internet access within their meeting rooms, or even in their main work areas. Traditional forms of security involve 128 bit encryption, private keywords and station IDs that are not broadcast but must be known before a laptop can connect. I can only very minimally recommend any type of wireless capability in most mortgage enterprises, because traditional forms of encryption are simply too easy for a motivated hacker to attack. Additional forms of protection such as the so called MAC address filtering, where a machine’s hardware address must specifically be on the list of machines permitted to enter the network, will help some.

But for the most part, limit this technology to the meeting room, and preferably only for Internet access. If you must provide access to the file server, limit the coverage of the hub and take all precautions. Consult an IT professional for more recent WPA technology that provides higher degrees of security when used with very long pass phrases. And if you are a bank or credit union, forget about any of this. You simply cannot take the chance and will be in violation of various federal security statutes if you run a wireless network in your office.

Accessing the Internet
This area of securing your data has already received a great deal of attention in the press, but a quick overview should provide some assistance in securing your office. First, it is a really good idea that your main file server not be the same machine you are using for accessing data from outside the office from the Internet. Any machine with direct access from the Internet needs to be separate from the other file servers in your office. Secondly, it is a given that you are using a hardware firewall/router to separate your office from the Internet. The router is primarily there to provide individual client connectivity through a single Internet share point. A side benefit of this hardware configuration is the ability to partially isolate these machines from unwanted ingress directly from the Internet.

If you are running a large office and protecting sensitive date, consider an additional firewall appliance in addition to the regular router. While it is beyond the scope of this article to get too detailed, this appliance can do such things as sample incoming data for certain characteristics of a hacker attack. In addition, it may allow data into the network only from specific other locations, further limiting the potential for hacking. This is one area where you simply have to acquire a very competent IT professional who is really on top of the latest in firewall technology, and you need to be aware that this is also one area of networking where there is plenty of marketing fluff and hyperbole, reminiscent of consumer audio and video marketing. The bottom line is that computer security technology is still in its infancy.

Leaving the Office
Several years ago, I would have listed a litany of suggestions about protecting data on your laptop or on your home PC if you were accessing your network from home. In the last year, technology advances have made it possible to truly keep your data secure while accessing it from outside of the office. It is still as important as ever to show some real care in the use of a laptop, considering the high rate at which they are stolen. A good, long password will keep users out of your machine if it is lost or stolen. Keeping very critical data both password protected and encrypted is easily accomplished with Windows XP Professional. Above all, loan information may be accessed live via the Internet with modern Loan Origination Systems, and the file does not ever need to be saved to the laptop or home office computer. There is nothing more disconcerting than losing a laptop loaded with several hundred files of personal financial account data, and wondering where it will end up.

Data security is as much a matter of common sense as it is using sophisticated technology. The keys to data security lie in a careful application of this advanced technology coupled with some practical direction sense on a daily basis. Hopefully, this article has made you aware of a few things you can do to better safeguard your office data.

By Stephen Breden

Improving PC Performance

Dear Thor,
My computer seems to continually slow down. What can I do about this?
–Cheryl W., Riverside, Calif.

There are several ways to improve the performance of your computer. Your friends might tell you to add more RAM (Random Access Memory), but there are easier ways that don’t cost anything. A good way to start is to not run unnecessary programs in resident memory. Certain programs are pre-scheduled to start running when your computer boots. Not only do they waste memory, but also loading extra programs when booting slows the process down.

You can see what is running in your computer by hitting Ctrl, Alt and Delete. (Hold down the Ctrl and Alt keys and then tap your Delete key once. Twice could initiate a computer reboot.) This will open a panel where you can click Task Manager. This is a useful utility where you can see what programs are actively running with the Applications tab. However, we are interested in Processes. Click this tab and you will see a list of functions along with the amount of memory each is using. You can also click on Performance and see the percentage of your CPU Usage. This number represents how hard your computer is currently working. When it hits 100 percent, and the RAM is used up, your computer creates and uses virtual memory on the hard drive. A task that used to take nanoseconds now takes mille-seconds, and slows down the computer.

Here is how you can control what automatically loads when you boot your computer. Click Start, Run and type msconfig. This will display the Windows System Configuration panel. Next, click on the Startup tab and you will see a list of the programs that are loaded during booting. If you scroll through the list, you might see several programs that you do not need to have constantly running. Un-checking them does not mean they are no longer available. It just means that if you run the program, it might take a few seconds longer to initialize, but this is OK if you don’t use it continually. The tricky part is recognizing what all the items are. It is not a bad idea to take a screen shot of the panel before you start de-selecting items. That way, you can keep track of what you are changing. If your computer seems to be losing an essential function, you can always reselect the item.


Dear Thor,
How can I set up wireless Internet access?
–Frank S., Pittsburgh, Pa.

WiFi is easy and inexpensive. Assuming you already have high-speed Internet access via cable, you can add a wireless router. All you have to do is plug one of the cables from your hub into the WiFi router. If you are already using all your ports, you can purchase a splitter for another $20. Access range varies from about 100 feet, to hundreds of yards, depending on the signal strength. LinkSys sells an access range for about $30 that is adequate for a home or small office.

The routers come with software that lets you name your WiFi signal. You can also create security so that a password is required to log on. Then, when your computer searches for wireless access points, you simply click on your named signal and the computer connects to it. Of course, to receive the wireless signal, you need a wireless modem, but most new laptops come with them as standard equipment. You can add one using a USB port for about $20.


Dear Thor,
Can I only use my own WiFi signal to get onto the Internet?
–Matt H., Raleigh, N.C.

No, there are several ways to pick up a WiFi signal when you are out of the office. One is to go to a place that provides them for a fee. Starbucks is famous for this. Most hotels provide WiFi access for about $10 a night. If you do a Google search for WiFi Hot Spots, you will see listings for access points available by location. is a good example.

There are also free hotspots all over the planet. lists them by area. Another way to a find a free hotspot is to simply drive around with your laptop on and wireless modem screen open. When you catch a signal, you can stop, log on and check your e-mail. Another way is to get a WiFi detector. These are tiny handheld devices (nicknamed sniffers) that find WiFi hotspots and display the signal strength.

By Thor Skonnord

Two Screens, One Mouse

Dear David,
I was at a Realtor’s office the other day and I saw someone with one computer, using two different screens. Her mouse actually went from screen to screen, as she was able to work within two different programs. How does that work?

Carol S, Chicago, Ill.

The first time I ever saw that I thought it was a magic trick. When you move your mouse across your computer screen to, compose an approval letter for example, you can also have another program displayed on another screen right next to the primary screen. You can either move your mouse across your primary screen directly onto the next screen, or move your mouse and click between the two screens. On the back of most laptops you’ll find another output that looks exactly like a standard video output connection. All you need to do is plug the extra monitor into that outlet and you automatically have two screens.

I have used two screens for nearly two years now and it’s a real timesaver, especially if I’m wanting to follow some baseball scores while I’m doing real work.

Dear David,
I’m thinking of getting VOIP for our office; do you have any suggestions?

Michelle T., Miami, Fla.

VOIP has matured to the point to where it works. A few short years ago when VOIP (Voice Over Internet Phone) was first introduced it was shaky going with packets getting lost, weird noises in the background and echoes.

Now, those problems have been mostly fixed. In fact, I’d say VOIP works just as well as any landline phone. The pros? Cost savings is one. Ease of set-up is another.

Cons? When (not if) your Internet goes down or your server shuts off, you have no phone service. Remember, VOIP is digital, just like any other file you send over the Internet. And if you lose connectivity for any reason, you can’t dial out.

In fact, during the WTC attack, it was only land lines that could get an outside line, all cell and VOIP phones were either non-functional or jammed. Keep that in mind. I would never completely cancel a land line, but keep at least one for emergencies.

Such services offer redundant servers to keep that from happening but it will happen. You should also invest in some wireless headsets with a USB port to plug into your computer instead of hooking up a telephone. There are several on the market but probably the most common sets come from Plantronics and cost a couple of hundred dollars or so.

Dear David,
Since you’ve probably seen or used most of the technology that is out on the market today, I was wondering, what is the neatest “tech” thing you’ve come across?

Mike C., San Francisco

That’s an interesting question. Since we all get accustomed to new “gadgets” that come into the marketplace, they become common objects. What I think is cool now won’t be cool in a few months.

I remember seeing my first fax sometime around 1980, which really amazed me. I couldn’t believe how something would transmit over a telephone line and reproduce exactly. Now of course, fax machines are almost extinct. My computer is my fax now, not a dedicated machine.

Cell phones were a big hit, too. Who can forget those shoe-box sized Motorola cell phones? What did they weigh, about two pounds? “Hey Mom, guess where I’m calling from?” I can actually remember saying and doing exactly that when I got my first cell phone in the early 1990s.

Today, I have a cool cell phone that does everything I need it to do. It downloads music, accesses the Internet where I can check my bank account or use it to follow mortgage bonds via Mortgage Market Guide and I can talk to people anywhere in the world.

The Internet was probably the biggest technology impact. No doubt there. What I do marvel at is the speeds at which computers work and transmit data over broadband connections. Remember the “screeeeech” noises each time you dialed up an Internet connection? In my office a few days ago, an employee fresh out of college heard that sound coming over a modem from someone testing it and said, “What’s that sound? Is something broken?”

Right now though? I’m pretty fond of my Blackberry. I also like those new eyeglasses that project computer images on them, so instead of looking at a screen you’re simply wearing glasses.

Now that is cool. I can be wearing glasses, looking like I’m working, but actually catching the Padres and Dodgers game over a Webcast.

By David Reed

The LO That Never Sleeps

If I could give anyone a one-lined answer for the best and quickest way to get results with a Web site, I would simply say, “Do what Alex Ramirez did.” Alex Ramirez, owner of Trusted Mortgage Pro, San Diego, Calif., has had his Web site up for just three months, but in less than a week, he’ll be closing his first deal, which will pay for his site for the next several years. More significantly he has 30 open loan files out of the 100 leads the site has generated at the time of this interview.

After nearly seven years in the business, Ramirez decided three years ago to open his own company. His business has been successful, with a current average of 30 closed loans a month with the help of 10 loan officers (a mix of part and full-time) and two loan processors. With a desire to open up new markets beyond California and Colorado, he expanded his lending territory with the help of his Web site and net-branch affiliations. “I don’t know of a better, more cost-effective way I could have expanded into other states without a Web site.”

The Web site
Did the site generate immediate results? “To make it plain and simple, I had left the site as it was for the first month and nothing happened,” says Ramirez. “After a month I decided to invest the time to take the training classes my Web site provider offered. I wasn’t sure what would come of it because I am a beginner and I was a little hesitant about doing things on my own. But after the classes, I followed through on what I learned and then, what seemed like overnight, I was getting results.” With approximately 100 leads in just a month and half, it’s no wonder this new “online-preneur” is raving about the Web.

As a Web site newbie, Ramirez took on what most people don’t when they first get a Web site—putting in the time to learn about his site’s capabilities as well as learning Web site marketing techniques. It’s not uncommon for an originator to buy a Web site under the misperception that it will magically generate leads just because it’s there. A Web site is simply another marketing tool and channel. If you don’t learn how to leverage it, you will not reap many rewards. But, as Ramirez demonstrates, learning even a little bit about different Web site marketing techniques can go a long way towards Internet success.

On top of the marketing, Ramirez also learned tips and gained ideas that helped him to maximize lead capture at his site. One such idea he had was to add property listings to his site. He realized that since he was in the business of helping his clients find investment properties, he could use his site to connect investors with properties.

That idea led to the next one: to develop relationships with listing agents, allowing them to place their listings on his site in exchange for the loan business that property will generate. He shared a great story to this effect. On a purchase application that came through his site, he contacted the listing agent after receiving a copy of the purchase agreement. After talking for a bit, he let the agent know that he was offering agents free listings on his site. She immediately understood the benefits and agreed to post her listings on his site. Ramirez now has a new source of referral business.

“I want my site to be a one stop shop where we can handle the diversified needs of my clients,” says Ramirez. “That’s why I chose to have real estate listings on it.” Ramirez’s goal is to have his site equally serve his mortgage and real estate clients as well as his referral partners.

“I’m all about investment and ROI,” says Ramirez. “And the ROI on my site has spoken for itself.” Since venturing out with the new marketing techniques, Ramirez has successfully generated over 100 leads (comprised of full apps, short apps, phone calls, listing inquiries and such). These leads have culminated into approximately 30 open loan files. “With the Web site-generated business, we have already doubled our average office production so far,” says Ramirez.

How is he marketing his site? Most of his efforts have been to place banners and buy sponsored listings in Yahoo! and Google. Sponsored listings are keywords you ‘buy’ in search engines to guarantee a particular placement on the search results page when someone enters that keyword or keywords. (For a more complete explanation of sponsored listings visit:

While this marketing has worked like a charm so far, Ramirez is aware that he shouldn’t rest on his laurels. Right now, due to the current loan volume, he is squeezing out a few hours on the weekend to continue to refine his ads in Google and Yahoo! He researches his competitors’ ads, makes tweaks to his ads and then reviews which changes get the most clicks. (With his search engine ad accounts, he is able to get information on how his ads are performing). And with the income he’ll be receiving from his online deals so far, he wants to expand his advertising budget.

Ramirez Recommends
“The first thing I thought when I saw the results I was getting was ‘why didn’t I do this a long time ago? How much money would I have made?” But, he also remarks, “It’s never too late.”

He continues, “The site will work for you day and night. It gives your clients freedom to be at home and apply at their convenience. It also adds to your credibility. And more importantly, sometimes people don’t want to talk to you. Make sure your Web site is available to those customers. My site has become the LO that never sleeps.”

By Lovina Worick

Searching for the Ideal LOS

What is the ideal loan origination software? Asking such a question is like asking anyone to describe his or her ideal mate, ideal car, or even ideal home. Everyone has an idea about what the ideal should be, but most cannot clearly express details. Therefore, people compromise to make progress.

Writers, of course, have no such limitations as each has the gift of perfect clarity of thought, elegance of expression and the ability to see the future as if living it today. So, collected and distilled from myriad user requests, and filtered through this author’s “perfect” visionary ability, is an overview of the prime charateristics of a quality LOS. Of course, you’ll have your own conisderations as well, but first let us define the capability and power contained in this program. One must show the sizzle first, then the steak sells itself, or so many sales folks would have you believe.

The ideal LOS provides each user with their unique view of just their own workflow. The ideal LOS automatically adjusts to changing job requirements. There are no extraneous screens or menus to wade through. This power reduces training costs, enhances productivity and streamlines all workflow processes.

The ideal LOS allows users to work from any location. It runs with full independence as a stand-alone option on a disconnected computer, and then automatically synchronizes, on a field-by-field basis, when reconnected to the network. It works equally well on a wired or wireless network or via an Internet connection.

The ideal LOS acts as a central hub for service providers such as AUS systems, appraisers, settlement services (escrow for you in California), title services and so forth. You can order these services electronically and receive the results electronically. For any AUS, system findings automatically parse into the condition tracking section to help processors and originators function with greater efficiency.

As a file moves from origination to closing, it passes through various handling stages. In each stage, that responsible person automatically gets exclusive read/write access to the file data. Other interested parties can look, but not touch. However, they can add comments, suggestions and requests to the conversation log. The log accepts entries and allows a fixed, but limited, time for any corrections by the log writer. Thereafter log entries become permanent and, therefore, can be used as evidence should that be necessary. Each entry is automatically date and time stamped and carries the identification of the entry writer.

In this LOS authorized users can enter a rate lock, thus closing future entries to the loan amount, rate, term and product type for that file. Each rate lock is time and date stamped and identifies the entry writer. The LOS accepts this entry from a frozen copy of the target lender’s fully adjusted online rate sheet for the lock date. Lender lock confirmation becomes part of the LOS record. Only authorized staff can make changes. Changes within the rate sheet are possible. Changes off the rate sheet automatically require concurrence from the target lender staff.

The ideal LOS contains template files that enhance loan accuracy and completeness. Templates include loan products, lender costs and APR requirements, and application models. Use of templates to create and modify files, automatically adjusts based on file status. For example, for new files, templates provide full details. However, to update working files, templates only change applicable data appropriate to the template type. For borrower-critical data, any data ambiguity requires immediate user attention before the change becomes part of the file. Changes to the templates can only be made by authorized users.

The ideal LOS manages required compliance information based on the property location, the borrower location and/or the loan type. Compliance updates come from selected contract service providers who are responsible for these data. The user of the ideal LOS subscribes for this service and can rely upon the provider for accurate and timely corrections.

The most-effective software also provides data connections to verify employment, deposits, loans and other important file data entries directly with source providers. This works through internal program links with appropriate data services to obtain objective third-party confirmation of all critical underwriting data.

With the ideal LOS, third-party service fees follow company contracts. Costs automatically accumulate to the Good Faith Estimate, with a clear subtotal available. Users can collect from their borrowers in advance of services, or at closing, based on individual business decisions. However, all costs are certain in advance, greatly reducing a common problem of understated service fees that balloon at closing. Origination company management negotiates all such fees and sets these as defaults in the ideal LOS. This is possible by region, by product type, by credit profile or any combination of factors management chooses to use. Only responsible management can adjust any automatic fee amounts. Any adjustment generates an audit trail identifying the date, time and responsible party for each adjustment.

The ideal LOS provides complete links between the LOS and the target lender’s computer system. Both the lender and the origination company share the same data set. Changes made by either party immediately appear for the other parties. Thus, when ordering any third-party services, such as loan documents, appraisals, credit, or information validation, all appropriate parties to the transaction see identical data. Store once, view often is the primary data set rule.

The software manages workflow and file progress according to established company procedures. This helps standardize results, smooth the process across various users, and ensure that customer service remains at a high level. Any loan that falls “off track” for any reason, generates an automatic error message for the assigned user. If not corrected within established time intervals, the error escalates automatically to progressive management levels to ensure prompt correction or other loan level decision.

With the ideal LOS, user status reports present appropriate information in easy to read formats and/or graphically, if preferred. This makes it simple to spot business trends, identify areas for additional training, and provides highly effective management guidance for each operating level in the company. One can easily compare the number of loans opened in any time period against the number of loans approved, or loans closed, or loans still in process, within company objective time intervals. One can view reports isolated by user, by task function, or by loan type, branch or marketing area. All such reports present with minimal selection requirements. However, drill-down detail reports are also available for appropriate management levels. All work from the same report engine. Learn once, use often.

The ideal LOS manages client marketing to ensure timely follow-up of information requests, important re-contact dates, service set points and in-process client management. Each user selects from available communication sets for each client. Contact may be by any combination of electronic, paper mail or telephone contact. Learn once, use often, to automatically provide exemplary customer service, exceed all customer expectations, and retain your past client business to grow referrals and business stability.

Having set these base objectives for the ideal LOS, there are many competing systems available. These include, but most certainly are not limited to, Ellie Mae Inc. with Encompass™, Pipeline Solutions™, Dynatek with MORvision™, Fiserve with Easy Lender™and Unifi™ LOS systems, Calyx Software with Point™, CBC with Byte™Mortgage Software, Dexma with Transaction Director™, Gallagher with Millennium™, GHR with Loan Origination Studio™ and others.

By Bruce Forge

Selecting an IT Professional: What You Need To Know

There is only one decision in your office that is comparable in importance to selecting your lead processor, and that is the process of selecting the individual you trust with your Information Technology (IT) needs in your operation. This decision has a direct effect on your efficiency, security, and your comfort level that your system will be there when you need it.

Level of Support
This decision will vary greatly on whether you need a full-time person or team, or whether you need the services of an IT professional on an occasional basis. If you are operating a large, multi-location branch organization, and have an ongoing requirement to support several hundred individuals, then this article is probably not for you. Suffice it to say that you will need some very sophisticated talent and systems with various levels of backup. In that case, we would be talking about a small team, with specialized individuals handling different areas of enterprise support. Yet, the actual requirements would be very similar to what you would need in a smaller enterprise.

Small- to Medium-Size Office
The only mortgage professional who does not need the assistance of an IT professional is someone who is technical in their own right. In fact, for years I have advised many small mortgage offices to select someone in their midst to train themselves on the basics of their network and basic Loan Origination Software (LOS). These form the basic elements of any successful mortgage enterprise, and someone in the office should be the key person to help others with issues that relate to technical issues on a day-to-day basis.

The basic decision that must be made up-front is whether to contract occasional IT support services, or to hire a dedicated IT person to support the office. For many offices, the cutoff point for this decision is frequently when the office has approximately 30 fulltime employees and loan officers. While I have seen larger offices utilize part-time contract personnel for their needs, this seems to be a logical point at which to consider having a full time person on staff.

Hiring a Contractor
Since many of my clients are in smaller offices, most of my experience has been with dealing with contract personnel. I am happy to say that the vast majority of them have proven to be competent and capable. When you hire a contractor, remember that you are not in a position to demand instant response when you have problems, and you will need to agree on a reasonable turn around time on problem situations that may arise.

Deciding on an hourly rate is one of the more problematical questions that may arise. I have come over time to believe that it is simply impractical to expect a client to pay the same hourly rate for basic helpdesk assistance versus setting up and optimizing a firewall/VPN appliance. In the former case, the client should be paying a lower hourly rate. In any event, the rates will be heavily dependent on local market conditions. One suggestion is to seek input from an IT association for your marketplace or talk to your peers.

Another decision is whether you need to contract on a fixed minimum amount per month, or strictly on a per hour basis. I would suggest a minimal monthly amount for very small offices that may not see an IT person otherwise. This way, the system can be checked to make sure that key systems, including anti-virus and backup, are functioning correctly. Larger offices may be doing enough work that this fixed monthly contract may not make sense. For the most part, I am against fixed fee quotes if they are based on anything other than time spent based on the hourly rate, because the only fair way to compensate an IT person is to compensate them fairly for their time.

Selecting an IT Professional
Whether or not you are hiring an IT professional on a contract or employee basis, the same key set of questions and considerations will apply. For example:

Certifications and Credentials—For a time back in the late 90’s, Microsoft and Cisco certifications were key elements in establishing credibility and expertise in the IT world. Unfortunately, a glut of “paper certifications” greatly reduced the credibility of these individuals. Many of them were well schooled in the certification exams and lacking in practical experience, to the extent that today I would be very reluctant to place more than passing interest in the individual industry certifications that an individual might possess. After all, would you expect a customer to hire you as an originator because you had a recognized industry credential as an originator, or because you had a great reputation for being capable and honest? It is no different with IT personnel.

Overall IT Experience—For the most part, good IT people are self-trained, and many of them are non-degreed, or possess degrees with irrelevant specialties such as foreign languages and fine arts. Experience is clearly the most important part of the skill set of an IT person. Unlike many jobs, additional time spent with the job, particularly with regards to current technologies and products, is the best determinant of skill level attached to an individual. IT personnel are simply not in a position to “settle in” to a job and float along, because new technologies and operating system changes are always occurring. An IT person simply has to remain current to be of value to the customer.

Mortgage Industry Experience—IT people are no different from anyone else in that they develop an affinity for a particular industry or peer group. Therefore, I would always want to hire an IT person who specialized in working with mortgage companies. They will understand the mindset of the broker and the unique requirements (demands) that may be made by a loan officer or processor.

Experience with LOS—Since the LOS is clearly the dominant technology hub in any mortgage company, expertise with that product is very essential if that person is to help you. While it may not be too difficult to get help with well known systems such as Point, Genesis, and Encompass, lesser known systems will certainly require some specific knowledge that is not generally available. Always hire someone who has experience with the LOS that you are using.

Overall Attitude and Mindset—This is probably the single most important attribute in making your decision. I am fond of telling the story to my associates of how I made the switch from being a “normal” broker in the mid 90’s to a full-time computer geek, primarily because of my own frustration with the IT people that I attempted to hire to assist me. I found some of them less than communicative and responsible (somewhat like I found some originators) and lacking in the desire to communicate to me clearly what was going on with my system. I simply found it easier to learn it myself and to have my independence.

You must insist that the person you hire have the people skills to handle the individuals and demands that occur when dealing with mortgage professionals. This includes taking the time to show you how to do some tasks yourself, and not requiring the IT person for every single task that may arise in your office. Education is definitely part of the job of an IT professional.

Honesty and Integrity—IT people are no different than mortgage people. You will find mortgage professionals who are not happy unless they make “two on the front and four on the back,” and this mindset also exists in the IT world. You will need to talk with other mortgage professionals and ask their opinions before making this decision, and you will have to try a person out before making a long-term decision. But be aware—the really good ones are actually quite affordable, approachable, and therefore very busy. That is the kind of IT person that you want to try and find.

By Stephen Breden

Compliance Mistakes That Can Cost You

Have you heard about the steep fines brokers are paying for failing to adhere to compliance laws? Chances are, you may be putting yourself at risk and could be the next one to pay up or go to jail. With the proliferation of the mortgage regulatory environment and increased government monitoring, keeping compliant is paramount. New laws not only carry huge fines, but some brokers are doing jail time as well.

It may come as a surprise, but your current loan origination system might actually be the main culprit that’s making you vulnerable to violating compliance issues. Are you nervous yet? However, staying one step ahead of the game doesn’t require a full-time, in-house compliance department. It may just be a matter of leveraging technology that’s at your fingertips: ensuring that your system is compliance savvy.

For many years the loan origination system has moved to become the system of record, and as such, anything that goes through it should go through compliance checks and be properly safeguarded. To do so, some loan origination systems automate compliance and shield companies from fraud. Think of it as Kevlar for loan files.

In the current environment, there are certain safeguards that should be native within the origination platform, which serve to protect both originators and borrowers. Specifically, originators seeking to avoid fines and protect their borrowers should make sure their loan origination system has the following features:

  1. Secure document delivery
  2. Automated forms updates
  3. Encryption
  4. Centralized data storage
  5. Centralized quality control
  6. Selective data access
  7. License checks

Secure Document Delivery
These days it seems that everything is e-mailed back and forth. E-mail is the new fax. However, most originators are unaware that e-mail is not a secure way to transfer data from one source to another. Not only is it not secure, it can also be illegal to transfer unencrypted loan data through e-mail.

The biggest culprits are loan origination systems that don’t encrypt the loan files stored on your hard drive nor provide a secure delivery system for your staff. Here’s an example. Without giving it a second thought, your loan officers or processors attach un-encrypted loan files to e-mail messages and send them to a lender or appraiser. This common practice compromises the privacy of the borrower by sending un-encrypted borrower data along the Internet. Because standard e-mail is vulnerable to hacking and misdirection and misappropriation of sensitive information, it is therefore critical to be sure that your loan origination system has the following capabilities: it has easy-to-use file encryption capability for both stored and transmitted files and it has a secure information transmission capability that avoids the security weaknesses of standard e-mail.

The best option is to use secure document delivery, which is included in some of today’s loan origination systems. This technology empowers originators to electronically send and receive loan files securely to intended recipients without using e-mail. It also prevents the possibility of borrower data being intercepted over the Internet.

Automated Forms Updates
With the increase in new loan products as well as changing product guidelines, there are new forms continually being introduced into the market. Each form is loan-product specific, so it’s important that the user have access to the most current and accurate form. How do originators do this? To ensure compliance and accuracy, mortgage professionals must use origination systems that automatically update forms. Using systems that count on updates to be manually downloaded and installed by staff can cause serious repercussions. With this method, users must know how to download these updates and must remember to do so every time an update is available. This reliance on human intervention puts companies at risk of human error and resulting compliance concerns.

In contrast, advanced loan origination systems eliminate the forms “game” completely and update forms automatically—like virus software that automatically downloads the latest virus updates. When users log in, the system automatically updates itself necessary. No need to worry about forms being compliant.

In a speech delivered at the National Association of Mortgage Brokers 2005 Annual Convention earlier this year, Federal Bureau of Investigation officials stated that computer hacking amounts to between $65 and $70 million in lost revenue in the financial sector. That tally did not include the loss associated with any legal recourse taken as a result.

Much to the surprise of many, one of the most popular loan origination systems used by brokers stores loan files in a non-secured format. How are the files not secure? These loan files can be opened using Windows Notepad–the simple text editor that comes with Microsoft Windows. Un-encrypted borrower files sitting on laptops expose companies to all kinds of security issues.

The good news is that advanced loan origination systems encrypt almost all files. Using these systems enables originators to evade hackers, or more likely, they simply protect companies and their customers from a simple laptop theft.

Centralized Data Storage
Loan files need protection, too. When storing loan data, the user should make sure that the environment is secure. Some of the most used loan origination platforms store loan files in non-secured environments where users can easily save them on a CD-ROM and take them away. This makes it easier for disgruntled employees to steal crucial loan data, and for companies to get into costly legal trouble.

Today’s forward-looking loan origination programs have a simple solution to this vexing problem. They store all crucial loan files on a central, secured server, which can only be accessed by the company’s authorized personnel. Companies don’t have to worry about employees running off with their loan files if it they’re all centralized and only select employees have access. Companies must also be able to report on all loan files to satisfy regulatory requirements. If loans are not centrally managed, loan data must be gathered from many different sources leading to the risk of non-comprehensive regulatory reporting.

It’s also important to back up the system regularly. The FBI recommends that back-ups be done twice a day. When back-ups are done regularly, it is easier to get the mortgage institution up and running again if a hacker has found a way to infiltrate the system.

Centralized Quality Control
Companies must ensure that loans are completed correctly to meet regulatory requirements. Quality control is a key component of this process. The origination system needs to facilitate quality control, not inhibit it.

For example, there are many origination systems that don’t provide visibility into loans since they operate in decentralized environments where loans are stored locally on the desktops of different computers. A decentralized environment inhibits quality control. On the other end of the spectrum, loan origination systems that leverage a centralized database enable mortgage companies to easily ensure the quality of all loans processed.

Selective Data Access
Many loan origination systems provide users access to too much information—information that is not relevant to their job functions. For instance, a processor may be able to view the entire company pipeline. This kind of open access to data leaves companies open to illegal activities. In contrast, other systems ensure that employees only have access to the tools and data that they need in order to do their job. Systems that don’t offer varying visibility levels native within the origination system leave the company at risk.

License Checks
To meet local regulations, loan officers must be licensed in order to originate loans in a given state. However, when volume is up, it is sometimes difficult to keep a close handle on where the loan is being originated, especially if the organization has several branches nationwide. Some origination systems don’t have safeguards in place to check up on licensing, whereas other newer systems can automate the process. Intelligent triggers will come up when a loan officer is originating a loan in a state that he/she is not licensed in, and will not let the originator proceed.

Compliance should be a huge concern for mortgage originators, and technology that enables compliance is essential for those who wish to avoid fines and long-term repercussions. Your system should make it easy to legally deliver documents electronically, evade hackers, use the most current forms, and enable company-wide visibility.

By David Lewis