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39 » VISIT US ONLINE @ DSNEWS.COM CONSIDER THIS WHEN APPROACHING LIEN-RELEASE Lien-release management is among the tasks that do not contribute directly to the bottom line success of a mortgage lifecycle, but if improperly handled, it can lead to significant costs, according to Danny Byrnes, VP Sales and Marketing, Nationwide Title Clearing. In a recent white paper, Byrnes discusses the best practices for mortgage loan servicers when partnering with a lien-release partner. "Regulators and legislators realized years ago that lien release management was an important part of the work the industry must complete in order to keep the marketplace running smoothly for consumers," Byrnes said. "While it is not a profit center for the servicer nor is it an area in which they have any hope of distinguishing themselves in the marketplace, failure to perform in this area can lead to significant dissatisfaction on the part of borrowers." According to Byrnes, there are several issues servicers need to consider when evaluating lien release management partners or their own internal processes, including a need for a proactive process for updating changing county/state requirements, a comprehensive plan for business continuity and disaster recovery, and many more. Other topics that are of vital importance, and should be considered foundational skills for any vendor include compliance to federal regulators, audited and validated security protocols, document review and signing practices, and proficiency in conducting chain- of-title research. Byrnes lists some key values for outsourcing lien releases: » Ease of sending work out when a relationship is in place » Solving staffing volatility » Mitigating the risk of high out-of- compliance penalties When choosing a vendor, he suggests demanding a specific commitment to accuracy and compliance, and a commitment to fulfilling the service level agreement. Vendors should also have both a strong focus the lien release business and a commitment to your own business, as well as a commitment to adequate technology, training, and transparency. REITS MAKE A COMEBACK Real estate investment trusts (REIT) are growing rapidly, according to e Wall Street Journal 's Ben Eisen. Real-estate investment trusts that buy residential home loans increased their mortgage-bond portfolios by almost 28% to $308 billion over the 12 months through March, the largest stockpile in six years, and according to Eisen, are poised to continue to grow as the government's housing market role shrinks. ough these firms are small compared to the mortgage market as a whole, Eisen notes that some analysts express concern that they are putting more of the mortgage market into the hands of leveraged firms with minimal oversight, noting that some risky REITs went bust during the last financial crisis. However, some suggest that REITs make up an optimal backbone for the mortgage market, leveraging less risk than before the financial crisis and able to quickly raise and deploy money when they see an opportunity. "If you want to have more private capital in the market, you need to manage the risks," Calvin Schnure, SVP for Research and Economic Analysis at Nareit, told the Journal. "Mortgage REITs hedge all of those risks." REITs have been buying mortgages traditionally within the domain of Fannie Mae and Freddie Mac, putting them into private mortgage bonds, while also buying securities from Fannie Mae and Freddie Mac that transfer default risk associated with the mortgages they back. As part of the Federal Housing Finance Agency's (FHFA) plan to shrink the government's footprint in the mortgage market, FHFA Director Mark Calabria is looking to take Fannie and Freddie out of conservatorship. "I see my goal as setting a path to end the conservatorship" for the companies, he said in an interview with e Wall Street Journal, adding that "they have to be stronger, healthier companies" compared to before the 2008 housing crisis. Among Calabria's concerns is the "qualified mortgage patch," which allows more highly leveraged homebuyers to obtain Fannie and Freddie-eligible mortgages. Patch usage has grown in the last few years, and according to Calabria, changing the patch would be a key tool to shrink Fannie and Freddie without a full overhaul, though he states that he does not intend to do away with it entirely.