Archives : 2011 : March

e-Mortgage, business intelligence less often used by lenders

Lenders are increasing IT spending – we have documented that. The mortgage industry could increase IT expenditures 15% or more.

IT objectives are largely inward focused. Lenders tell MORTECH 2010 that they want investments in IT to reduce costs, integrate workflow, reduce paper, modernize processing infratructure. These largely are measures to imprive operations. We can’t see any break-away activities.

Lenders are giving some technologies attention and funding. Some often discussed innovation seem to face postponement and lack of funding in 2011.

Look for widespread use of  mobile (smart phone), PPE engines, AUS, AVM, Electronic Document Management, Fraud Detection.

Technologies less used include e-Mortgage, Business Intelligence (BI), Pipeline Rate Risk Management, and Servicing Portfolio Risk Management

Jeff Lebowitz

More Impact of Financial Reform

I am concerned that the crisis-driven financial reform may be guilty of being too task driven and not knowing about the impacts on companies ever innocent of imprudent behavior.

After-the-fact regulations are presented with the urgency of the already-past financial crisis. While certain to reduce systemic risk in the future, tighter regulations born of crises do not differentiate between the guilty and the bystander, do not discover the harm to profitability caused by heightened vigilance and more frequent auditing.

To my reading of the role and impact of financial reform, I see harm done that was not contemplated by the authors of reform. The extreme focus on avoiding the effects of excessive risk taking will make it difficult and expensive for smaller financial institution to do business and always stay in compliance. The expense of reform will fall disproportionately on smaller lenders. It is clear to me that this is not the social or structural result intended by the regulators.

One important shortcoming of  new regulations is that the regulators do not calculate the cost of compliance. A complete cost benefit analysis is not performed. The goals of regulations rarely include ease of implementation.

For example, let’s look at lender response to the well-intended federal Home Affordable Moddification Program. In our recently released MORTECH 2010, we surveyed lenders’ views on HAMP. The question we asked was, “Would you say that HAMP compares favorably or unfavorably with other loss mitigation alternatives such as short sales, deeds in lieu, and R-E-O? (On) Ease of execution.”

Lenders told us that HAMP was more difficult to work with than the more conventional methods of resolving defaulted loans.

Experience with HAMP	% of MORTECH Respondents
Easier execution	17%
More difficult execution	64%
Not sure	19%
Source: MORTECH 2010

The consensus opinion of lenders is that HAMP placed a greater operational burden on lenders than did short sales, deeds in lieu, REO, etc. According to our evidence, well-intended federal programs with impacts not fully considered is likely to be more expensive than imagined and will not obtain the benefits intended for the industry or for society.

Jeff Lebowitz on February 28, 2011