PERSON OF THE WEEK: Richard Yonis is senior vice president and national sales director for LERETA, which provides property tax data and flood hazard status information to mortgage lenders and servicers.
MortgageOrb talked to Yonis to gather his thoughts about the industry overall and the risks associated with inadequate oversight of tax and flood functions.
Q: What do you think is the current climate of the industry?
Yonis: As reflected by the amount of new tax contracts that have been ordered, it appears new loan origination volume had slowed in the first quarter of this year, except for a few lenders. It’s not unusual coming off the fourth quarter (2016) holidays that the first quarter is somewhat slower.
On a brighter note, volume in the second quarter picked up considerably and matches the increase during the same period in 2016. While the interest rate hike, albeit small, did not help during the first part of the year, it currently looks like we are on track to match last year.
Q: What does the landscape look like for the industry moving forward?
Yonis: The regulatory climate and possible interest rate hike have taken their respective tolls on loan production. Many lenders are waiting to see if regulations are relaxed, or if they need to continue to enhance and spend more money on compliance or audits, rather than on sales and servicing.
Q: How are you technologically positioned for the future?
Yonis: We interface with more than 25,000 nationwide taxing authorities, as well as numerous loan origination systems and loan servicing systems. We have invested in our geographic information system for flood and LERETA net, as well as TES (Total Escrow Solutions) for tax.
Recently, we released our latest tax parceling tool, which improves the identification of secondary parcels – which, until now, was a real pain point that resulted in penalties, interest and lost properties. Our tax procurement, reporting and automation tools (bots) are up-to-date to provide fast and accurate information. Our technology helps gather specific data for numerous tax-related issues, such as tax status reports and tax certificates. It not only saves time, but also increases accuracy when delivering critical data to lenders to enable them to meet short funding windows. Additionally, flood zone reporting updates can be sent directly to servicers and insurance partners, resulting in increased efficiency.
Q: What is the biggest challenge that servicers must address around property tax or flood?
Yonis: With over 25,000 nationwide taxing authorities, the biggest hurdle is tracking unique due dates, requirements and ensuring tax data from taxing authorities are identical to the loan servicing system data. When either the property value or the tax rate goes up, the net effect is the total payment required for escrowed accounts changes, as does the actual property tax amount due. If the lender or servicer is not current when it is time to make the property tax payment, then escrowed accounts and incorrect payments issued may negatively affect the borrower and the property, resulting in penalties, interest and, in some cases, loss of the property.
Flood has a different effect on servicers, as they can incur severe penalties if properties are not protected and homeowners are not duly notified of a change of property flood zone status. Automated alerts notify lenders, servicers and their respective insurance carriers about property changes, and homeowners can be notified and documentation recorded to ensure the lender and servicer are compliant with all regulations.
Q: Property values have increased over the last few years. What effect has that had on servicers?
Yonis: Increases in property values and tax rates directly affects escrowed and impounded loans. Without the proper updated payment information, payments sent with outdated information may be returned by the taxing authority. Tax line audits prior to a tax cycle can prevent this from occurring.