A Message from Vicki
As we set our sights on goals for 2014, I want to share a brief recap of 2013 and highlight some of our current focus areas. We are off to a quick start this year and I am excited about our potential impact within the mortgage industry as well as what we have in store for our clients.
Last year, we worked through many industry changes. Yet in spite of the industry volume fluctuations and increased regulatory scrutiny within the mortgage industry, our teams maintained solid performance. In 2013, we facilitated over $66 billion dollars in tax payments on behalf of our clients and our Flood team processed over 10 million orders. While some of the key issues we will face this year include the further implementation of CFPB requirements, QM rules and flood regulation changes, we will continue to position our teams to quickly respond to the needs of our clients.
At the corporate level, we recently communicated an important organizational change. On Feb 21, we announced our reorganization into two operating segments – Data and Analytics (D&A) and Technology and Processing Solutions (TPS). Formerly known as Mortgage Origination Services (MOS), the TPS segment consists of:
- Residential and Commercial Property Tax Processing, which includes CoreLogic Tax Services
- Originations and Underwriting Services, comprised of Credco and CoreLogic Flood Services
- Technology and Outsourcing Solutions, which includes the Mortgage Technology Group, Document Solutions and National Joint Ventures
We expect the realignment to enable a stronger focus around our core strengths in data and analytics, tax payment processing and data-enabled services. Our clients will experience a seamless transition as we begin to fulfill our realignment goals and we will keep you apprised of progress throughout the transition.
The Property Tax Delinquency Risk Score helps servicers
sort loans at risk for tax delinquency.
The road ahead…
While our teams continue to become more adaptable, we are dedicating our efforts to create an infrastructure that responds more quickly to our clients’ needs. The focus in 2014 will include leveraging our extensive data repositories across CoreLogic to develop new solutions. We are excited about the benefits that this refined structure will allow us to deliver to your teams. Through collaboration with our Data and Analytics Research Team (DART), we are already seeing some of the results. Greater borrower and loan insight through our Property Tax Delinquency Risk Score is helping servicers identify those borrowers most likely to default. These are just some of the things in progress for 2014 and you can read more about current efforts in this issue.
In 2014, we are planning for expanded partnerships with agency payment vendors. Through these relationships, we anticipate improved data collection methods and more extensive payment automation. Our Performance Excellence teams are also strengthening their focus on quality assurance, corporate governance, six sigma methodologies, training and metrics reporting enhancements. The result will be higher quality services for you and your servicing teams. And, with the increase in financial services industry regulations and accountability for the oversight of third-party servicing industry vendors, all of these focus areas will help position your organization for optimal performance.
Most importantly, we appreciate your continued business and look forward to a successful 2014.
Senior Vice President, CoreLogic Escrow Services
Property Tax Delinquency Propensity –
A New Scoring Method for Determining Risk
In an era of big data, servicers now have access to more information than ever before. Now that we have all this data, what should we do with it? How can we know our customers better? Can we predict their needs? When will they next need access to a financial product or face a financial dilemma? Those are the questions long asked by servicers. For decades, mortgage companies have lacked access to information needed for building a comprehensive view of borrower behavior.
To help answer these questions, our property tax teams have focused on methods for precisely extracting information across some of the largest borrower, loan and property databases in the industry in an effort to paint a more accurate picture of the risk of future tax delinquency concerns for non-escrow borrowers.
Using our newly created framework that synchronizes data between multiple databases, servicers can gain a greater level of loan risk confidence through our tax scoring process. The result is increased clarity around a borrower’s potential for default.
In the summer of 2013, our property tax teams began working with our master six sigma black belts and our Decision Analytics and Research Team (DART) to build an optimal match of datasets for predicting, to a degree of certainty, which population of a non-escrow loan portfolio is likely to be tax delinquent within the next six months.
Using logistic regression, a type of probabilistic statistical classification model, our analysts built a risk scoring model that leverages predictor variables through a combined analysis of the following data:
- Mortgage delinquency history
- Mortgage loan age (in units of months)
- Loan recourse
- Origination loan-to-value (LTV)
- Mortgage loan term
The objective of this scoring process is to sort high-risk loans for tax delinquency. Based on recent mortgage performance history, the tax delinquency risk score helps measure the propensity for a loan to be tax delinquent within six months.
Based on analyses of larger portfolios (e.g. a top 10 servicer), borrowers who are never late on mortgage payments are six times less likely to be tax delinquent within six months than borrowers who are missing current mortgage payments (3.6% vs 20.1%).
Borrowers who had missed one mortgage payment in the past, but have brought payments current, are 3-4 times more likely to be tax delinquent than those who are never late on mortgage payments (12.6% vs 3.6%, likely indicating financial difficulties).
Servicers can experience several benefits through a property tax delinquency risk score:
- Receive a list of non-escrow homeowners with high future delinquency risk for potential selling of short term loans
- Measure year over year average delinquency risk rates for percentage of high risk loans as an index to help predict the amount of advances or conversions to expect during budgeting cycle
- Develop a call program targeting non-escrow homeowners with high future delinquency risk, explain risks of tax delinquency and offer a loan modification or refinancing/escrow conversion
- Create a delinquency risk index by agency
For more information about how this property tax delinquency risk scoring method can help mitigate risk for your portfolio, please contact one of our property tax professionals today.
CoreLogic Flood Available Through Ellie Mae’s
New Total Quality Loan™ (TQL) Program
On March 20, Ellie Mae® announced that it has expanded the scope of its Total Quality Loan™ (TQL) program to include the ordering of flood services.
Including flood services helps to promote a higher level of compliance, loan quality and efficiency for mortgage banks, depository banks and credit unions of all sizes. As a part of Ellie Mae’s Encompass® mortgage management solution, TQL provides secure, seamless ordering of compliance and verification services through a single sign-on. TQL promotes consistent best practices and reduces errors by making the following services available on one easy-to-use screen as part of a seamless workflow:
- Encompass Compliance Service™ Enables automated compliance checks early and often to uncover defects and compliance concerns throughout the origination process.
- Encompass 4506-T Service™ Enables electronic ordering and income verification of IRS tax return data.
- Encompass Fraud Service™ Assesses and evaluates early payment default, loss-severity risk, fraud detection scoring and data alerts.
- Encompass Flood Service™ Validates a property’s flood zone and helps to speed the loan process with electronic order and secure transfer of flood risk products.
Ellie Mae’s Encompass users can select CoreLogic Flood from within an easy-to-use screen to process an order without leaving Encompass. Once complete, the flood certification information will automatically populate within the appropriate Encompass fields in the borrower’s loan folder, saving time and improving accuracy.
“We are excited about our growing relationship with Ellie Mae. Including CoreLogic Flood as the preferred provider for the Encompass Flood Service is a natural extension of our solution set already available to TQL users,“ said Kevin Mullins, VP Business Development. “The combination of Ellie Mae's innovative software with the quality and portability of CoreLogic data in TQL gives users an advantage in the marketplace.“
For more information about Ellie Mae’s TQL program, visit www.elliemae.com.
Flood Safety Awareness Week is a Timely Reminder
The 2014 Flood Safety Awareness Week campaign ran recently from March 16 through March 22. The National Weather Service (NWS), the National Oceanic and Atmospheric Administration (NOAA) and the Federal Emergency Management Agency (FEMA) all participated in promoting this weeklong event with the goal of highlighting the risks posed by flood as well as the importance of being prepared. Some considerations of which these organizations say everyone should be aware include knowing the difference between types of flood advisories, how to prepare before and during a flood, and what to do once the flood recedes. With possible spring flooding from winter snowmelt and the beginning of the 2014 Atlantic hurricane season just a couple of months away (June 1), this campaign is timely.
As we have seen in just the past few years, floods can strike anywhere. The flooding that occurred in the central U.S. and Colorado last year exemplify the fact that floods can and do occur where we may not expect. They even occur outside the limits of recognized high-risk flood areas. This further validates the importance for all to consider the benefits of flood insurance. One statistic that has remained relatively unchanged through the years is that a quarter of paid NFIP flood insurance claims are on properties outside of the Special Flood Hazard Area. For additional information on flood statistics and the benefits of flood insurance you may also refer to FEMA's NFIP information and outreach website at www.floodsmart.gov.
Flood Map Revisions
Nearly 300 communities across the country are scheduled to receive updated FEMA flood maps during the second quarter of 2014. Of those scheduled for updates, some of the more notable communities include:
- Baltimore, MD - April 2
- Fort Bend County, TX - April 2
- Chippewa County, WI - April 16
- Shreveport, LA - May 19
- Suburban Harris County, TX - June 9
Some of these communities are only being revised partially. We do expect a number of notifications to be generated based on the population of these areas. While some properties may require additional research by our trained staff, CoreLogic is prepared to manage the upcoming map revision volume quickly and effectively. Most notifications should be sent within a few days from the new effective map dates.
In the meantime, you can download our Risk Map Updates document to view a list of communities to receive flood map revisions in the coming weeks.
Property Tax Loans
In Texas, private lenders have the ability to offer property tax loans to homeowners in exchange for a tax lien. Updated tax codes allow these private lenders to categorize a property tax loan as a transferred tax lien. Additionally, the tax code also gives property tax lenders the authority to charge “loan origination and closing fees” which are added to the property tax loan amount in addition to a statutorily allowed interest rate of up to 18%.
This is an important area to watch, as there is a rapid increase in the number of entities focusing on this type of loan product. In 2009, the estimated number of organizations offering property tax loans was 46. Today, that number has increased by 210% to 97 and is expected to continue on its current trajectory.
While it could be seen as a last option for distressed borrowers, this new loan option presents several challenges:
- In subsequent years, taxes can be paid by lenders, even without prior liens being paid off
- Payments by these lenders may be considered misleading because the tax lien may not be easily recognized
- Communication to the mortgage servicer or tax servicing company from the taxing agencies could reflect taxes as paid
A primary issue with property tax loans is that the taxing authority may recognize these transferred liens as superior to any pre-existing lien tied to the property. When the borrower defaults on the loan, the lien holder has the authority to move forward with a non-judicial foreclosure.
While the mortgage servicer or other lien holders would have the ability to redeem property at foreclosure sale, costs would likely include:
- Foreclosure fees incurred
- Property preservation fees (allowed by statute)
- Redemption or legal fees associated with foreclosure or transfer
Our professional services teams and property tax professionals use a combination of data assets, lien analytics logic and a partnership with taxing authorities to assist mortgage lenders with identifying the risk of tax delinquencies. If a percentage of your portfolio contains loans in a super lien state, our consultants can review your portfolio to help determine those loans to be flagged for further action.
As the legal and operational dynamics of this loan product continue to develop, we will keep you apprised of any issues regarding this additional lien consideration. For more information about how our property tax professionals can help your organization assess property tax loan risk, or if you have any questions, please contact us today.
The Mid-Atlantic Service Center (RSC25) Has Moved
Please note the new information for our Mid-Atlantic Service Center. All phone numbers for the Mid-Atlantic Regional Service Center (RSC) employees, including our office number (800-229-3477) will remain the same. The new address is:
505 Eagleview Boulevard
Exton, PA 19341
To ensure there is no interruption in shipments to the center, please update this address in all applicable systems including FedEx and courier systems. If you have any questions, please contact the Customer Service Team in the Mid-Atlantic Region Service Center at 800-229-3477, option 1.
Property Tax User Guide
The Tax Service Handbook has recently been updated. Current tax service clients can reference this 260 page guide to learn more about service requests, forms, legal tracking, tax amount reporting processes, tax payment status information, claims, audits and more.
To obtain a copy of this comprehensive customer handbook, contact your Account Manager or download via SMARTWeb®.
Legislative Update for Arizona
(serviced by the Western Region Service Center)
CoreLogic is alerting customers to a potentially unfavorable Lien Assignment bill introduced in the Arizona House of Representatives. House Bill 2381 was introduced on January 22, 2014 and passed out of the Committee on Ways and Means on February 17, 2014 with adopted amendments. The bill has been referred to the House Rules Committee.
Under the amended version, the property owner can authorize assignment of a lien against real property to an assignee if the country treasurer is provided with written authorization from the property owner and payment of taxes, interest and penalties due on the real property; and other prescribed criteria* are met (see the provisions*).
This bill may present added risk to both the property owner and mortgagee in that a default could result in lien foreclosure by the assignee against the property owner. While the local government entity typically has a superior position lien in the case of nonpayment of taxes, the ability of the property owner to authorize the assignment of that superior position lien and foreclosure rights to a third party assignee may present additional risk that the mortgagee may wish to address should this bill pass in its current form.
CoreLogic strongly recommends that our customers review this bill with their legal counsel in order to fully assess risk and impact along with what (if any) action they may wish to take in opposition to this bill.
As of March 7, 2014, this bill has advanced through the Rules Committee and is now subject to consideration before the full House. CoreLogic will continue to monitor the progress of this bill and will update the status upon further significant developments. Note that the same sponsor, Representative Olsen, introduced a similar measure in the 2013 session (House Bill 2519). That bill also passed initial committee with amendments but failed to advance any further.
For additional important state updates, please contact your Account Manager to request the Weekly Tax Bulletin or access via SMARTWeb®.
HR 3370 Enacted
After passing the House and the Senate, the President signed HR 3370 (the “Homeowner Flood Insurance Affordability Act of 2014”) on March 21, enacting the bill into law. HR 3370 repeals or modifies some of the provisions of BW 12 while providing for new requirements related to the NFIP. For example, HR 3370 reestablishes pre-FIRM subsidies for applicable new flood insurance policies and purchased properties, however, pre-FIRM properties are subject to new annual rate increases and surcharges. HR 3370 also repeals Section 100207 of BW 12 (which would have impacted the NFIP’s grandfathering rule) and modifies the expanded escrow requirement of Section 100209 of BW 12. HR 3370 also includes new requirements such as the exclusion of certain detached structures from the mandatory purchase requirement and allowing deductibles up to $10,000 for residential properties. We continue to analyze the various provisions of HR 3370 while considering its impact on NFIP stakeholders. In the meantime, FEMA has issued a bulletin acknowledging enactment of the new law and FEMA's intention to work with stakeholders on its implementation. It is anticipated that in the near future both FEMA and the Federal Lending Regulatory Agencies will begin issuing guidance and proposals for implementing various provisions of HR 3370.
As a reminder, the CoreLogic “Guide to BW 12” is available through our Flood Services website as a resource to help you track the continued implementation BW 12. In light of HR 3370, we have highlighted those areas of the Guide where sections of BW 12 will be impacted due to HR 3370. Also, a list of key points about HR 3370 and other bills can be found on our Federal Legislation web page.
In other news related to BW 12, FEMA issued bulletin W-14010 on March 28 updating its request for support from WYO companies in timely responding to documentation requests from FEMA as they handle inquires related to BW 12 and individual flood insurance policies.
State Legislative Activity Related to Flood Insurance
Regarding some of the state bills mentioned in previous alerts, Virginia Senate bill 74 was enacted on March 17. As a reminder, this legislation prohibits a lender from requiring a borrower to purchase flood insurance in an amount that exceeds the improvement’s replacement value (which may be based upon the insurer’s valuation or an appraisal). Also, although there has been no further action on Rhode Island House bill 7081, there has been recent activity on similar bills in Massachusetts (House bill 3783 recently passed the Massachusetts House) and Connecticut (there was a hearing on Senate bill 265 in March). Among other things, these three bills would prohibit a lender from requiring flood insurance that exceeds the amount of the mortgage. Your Compliance or Legal Department may want to consider these state bills to determine any potential business impact, including whether or not the bills’ requirements would contravene the existing obligations under federal regulations.
There has also been further activity on Florida Senate bill 542 (which passed the state Senate on March 26) and a similar bill in West Virginia (Senate bill 621, which was signed by the Governor on March 20). These bills allow greater flexibility for private insurance companies to offer various types of flood insurance coverage outside of the NFIP.
If you are interested in additional information or discussion related to the topics in this article, please feel free to contact our Compliance Department at firstname.lastname@example.org.
This communication is for informational purposes and is not intended to (nor does it) provide legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting an attorney.
ASK THE FLOOD EXPERT
Q: We recently came across news about a community that may possibly be suspended from participation at a future date due to a possible failure to comply with NFIP rules. We currently service loans in these communities and receive Life of Loan service for our CoreLogic flood zone determinations. When can we expect notice of these pending suspensions?
A: Pursuant to our Life of Loan services, CoreLogic monitors community participation status changes and will report to you the changes to flood determinations which may impact the flood insurance requirements on your loans. Generally speaking, the possible suspension of a given community does not have an immediate impact on your existing portfolio or your customers. Importantly, most communities that face imminent suspension will take steps required to correct the issue to avoid suspension. For the communities that are suspended, many will promptly correct the issue and regain the participation status. Thus, while we receive the advance notices through the Federal Register and FEMA bulletins, we do not take action because many communities take corrective action to avoid suspension.
Please be assured that in the event a community is suspended, existing flood insurance policies on properties in the SFHA remain until renewal. In the situation that a community did not regain its participation status before a policy comes up for renewal, the agent would inform the policyholder that the flood insurance policy may not be renewed due to the community’s status. The federal flood insurance requirement would not apply on the loan in that situation although private flood insurance might be obtained or required for other reasons. A lender may require flood insurance from a private insurance provider in that event pursuant to rights reserved in the mortgage agreement.
If you have a question for Ask the Flood Expert that you believe would benefit the lending or insurance community through response in this quarterly publication, please send us an email. All questions will receive a response regardless of whether or not they are published.
ASK THE TAX EXPERT
Q: What percentage of loans is non-escrow?
A: Several years ago, during the era of sub-prime, no doc, and stated income loans, more mortgages were classified as non-escrow. With tightened lending requirements and lender-initiated risk reduction processes, the percentage of escrow to non-escrow loans has changed. The percentage of non-escrow loans has trended slightly lower and currently hovers around 24%, or roughly 1 out of 4 loans.
If you have a question for Ask the Tax Expert that you believe would benefit the lending community through response in this quarterly publication, please submit by email. All questions will receive a response regardless of whether or not they are published.
Feel free to forward this newsletter to any colleagues you think will find it informative. However, any other reproduction of, or modifications to, any part of this newsletter is strictly prohibited without the prior written consent of CoreLogic.
If you have any questions or comments regarding this newsletter, please call us at (800) 447-1772
or email us here. To learn more about CoreLogic visit us at corelogic.com.
This communication is for informational purposes and is not intended to (nor does it) provide legal advice.
The information herein should not be used or relied upon in regard to any particular facts or circumstances
without first consulting a qualified legal professional.
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