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Keys to staying relevant.

TECHNOLOGY FIRMS MARKETING TO CONSUMERS typically search for a "killer app" to quickly ramp up sales. But mortgage lenders are most effective when they view automating as a long journey rather than searching for a single overriding solution.

Titan Lenders Corp., Denver, is a growing firm that's altered course several times since starting up in 2007. Such corporate nimbleness helped Titan grow by more than 70 percent last year, according to President and Chief Executive Officer Mary Kladde.

"We're a technology-enabled service provider," she explains. Over time, the firm's strategic emphasis has changed to cater to evolving market needs.

At the end of 2014, Titan announced it was getting out of the business of fulfilling the closing, funding and post-closing functions for retail lenders. A combination of regulatory issues and profitability concerns convinced Kladde it was time to shut that division.

Titan currently is dedicating resources to working with investors and servicers. Earlier this year, the company obtained optical character recognition (OCR) software from Top Image Systems Ltd., Plano, Texas, to evaluate loan packages being considered by investors.

Titan receives a productivity boost from OCR, because with the technology closing statements no longer must be manually compared with underwriting documents. Automation allows discrepancies to be spotted faster and at less cost than with manual reviews.

Working with existing loan files makes Titan aware the industry still deals with mountains of paper. Kladde notes that OCR isn't a perfect solution for pulling data from documents. But it can digitize at least two-thirds of a typical loan file, making it easier to ensure "loans were closed in the fashion they were approved," says Kladde.

She contends automation is crucial to success. "If you don't invest in technology, you won't stay relevant," Kladde asserts.

New focus

Revenue from MERS[R] audits more than doubled last year, according to a Titan company statement. Regular audits are required to reconcile loan data held by MERS with what's in servicers' files.

This practice stems from the 2011 consent order between MERS and the Federal Reserve regarding how the ownership of home loans is tracked as servicing is purchased and sold.

"Ensuring data is accurate is key to the future" for the entire industry, predicts Kladde. Having correct information is essential for companies working anywhere in the loan cycle.

Much of Titan's business is driven by regulatory requirements. Revenue from compliance support services nearly tripled in 2014, Titan reports. And the impending introduction of Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rule makes data accuracy "imperative to make sure you have a saleable loan," Kladde notes.

Additional regulatory initiatives are expected to weigh on mortgage lenders. Kladde points out that some buyback demands are based on data discrepancies found in appraisals submitted through the government-sponsored enterprises' (GSEs') Uniform Collateral Data Portal[R] (UCDP).

She foresees Fannie Mae and Freddie Mac also using underwriting data to determine buybacks in the future. If performing loans have file errors, they may be sent back to sellers.

90-day hiccup

Kladde isn't the first industry executive to voice concerns about the implementation of TRID. She's worried that many systems involved in originating and processing loans weren't ready to be tested for adherence to TRID standards until June 2015.

"Many vendors aren't ready," Kladde explains, and "not all questions have been answered" about applying TRID in specific situations.

"Unpredictable things happen at the closing table," Kladde observes.

Around the time lenders are heading to the Mortgage Bankers Association (MBA) Annual Convention, she suggests we'll start experiencing "a 90-day hiccup" in business as lenders, vendors and settlement service providers struggle to comply with TRID.

Borrowers may feel compelled to close with inaccurate documents or run the risk of losing their earnest deposit due to contractual timing issues, says Kladde. "Litigation's going to increase," she predicts.

Yet Kladde expects lenders to bounce back. "We'll figure it out," she believes. "We're very resilient as an industry."

The same can be said about Titan Lenders Corp. Soon after its July 2007 founding, "the world collapsed" in August as liquidity evaporated from the mortgage markets.

But "we're a scrappy bunch," comments Kladde, who has a diverse background in mortgage operations. Previously she worked at a doc-prep firm, as well as managing retail and wholesale closing and post-closing functions for a large lender.

Titan initially focused on assisting mortgage brokers intent on becoming bankers in order to stay in business. Brokers accustomed to table funding needed help with the added responsibilities of underwriting, closing and funding, she explains. Later those relationships expanded into providing warehouse credit lines.

Titan performed purchase reviews for housing agencies in 2009. But the next year MERS audits for servicers started picking up.

Today jumbo loans are bought by the firm's subsidiary, Titan Capital Solutions, a national correspondent investor. Buying opportunities are seen as the secondary market attempts to find its footing after the housing crisis.

Titan should be able to realize those expectations, given the firm's ability to find profitable niches in different conditions, its devotion to technology investment and the continued imposition of regulatory duties on lenders.

Currently Titan sees good prospects for "scratch-and-dent" loans. Scratch-and-dent mortgages contain data, document or compliance concerns that raise red flags for traditional investors. Yet those issues shouldn't make the mortgages riskier.

Private-equity funds are buying these newly originated, performing loans that "just miss" GSE standards at deep discounts, notes Kladde. Titan's detailed analysis allows investors to know what they're purchasing.

Kladde says Titan's technology is Web-based and works interactively with clients. "We're very transparent," she observes.

Yet the cost of technology requires lenders--as servicers have recognized for some time--to achieve adequate scale to justify the investment. And as the need for good information permeates our industry, Kladde worries that some firms won't be able to make the necessary investment in technology.

"It's getting more expensive and harder to survive as a small lender in this regulatory environment," she contends.

Howard Schneider is a freelance writer based in Ojai, California. He can be reached at
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Title Annotation:TECH TALK; Titan Lenders Corp company management
Comment:Keys to staying relevant.(TECH TALK)(Titan Lenders Corp company management)
Author:Schneider, Howard
Publication:Mortgage Banking
Article Type:Company overview
Date:Jul 1, 2015
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