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82 MICHIGAN States Examine Hardest Hit Funds Hardest hit programs in Michigan and Indiana are in a pinch, with one state nearly out of funds and the other under fire for misuse of those dollars. Both programs are designed to prevent foreclosure and help state homeowners in need. According to Michigan Radio, the state's "Step Forward" program has received $761 million in federal funds since 2010—but those funds are quickly dwindling. In fact, only $40 million remains in the program's coffers. Mary Townley, VP of Step Forward, says more than 50 percent of the state's funds have been spent on demolishing housing in blighted communities, with the remainder going to underwater homeowners. ough the program technically has until 2020 to spend all its funds, according to Townley, the money will run dry long before then—and she doesn't expect any additional funds from the federal government. Indiana is also having problems with its Hardest Hit Fund, as a newly released report from the Inspector General for the Troubled Asset Relief Program reveals money was inef- ficiently and ineffectively used. According to the report, the state's funds—which amount to more than $32 million—have only helped 9,127 homeowners over the last six years. e program spent $23 million on de- molition and still has 33 percent of its funds available. Brad Meadows, spokesperson for the Indiana Housing and Community Develop- ment Authority which administers the Hardest Hit Fund, said the state hasn't misused its dol- lars, blaming the stilted appropriation of funds on a "bounce back in the housing market and a drop in the foreclosure rate in Indiana." "We saw a 37.2 percent decrease in mort- gage foreclosure filings from 2011 to 2015," he told Call 6 news. "It is down more than 50 percent since 2006." Like Michigan, Indiana will need to use all its federally issued funds by the end of 2020. But the program has already stopped accepting applications for assistance. "While we had to stop accepting applica- tions 18 months early—which many other HHF states have had to do as well—it was not because of an alleged misuse in funds," he said. "It was that we were able to quickly and ef- ficiently identify and help families most in need of assistance to remain in their homes." OHIO Liens and Judgments Data: Not Gone for Good By Ken Viviano Mortgage lenders rely on liens and judg- ments records to assess a borrower's creditwor- thiness and capacity for repayment. For decades, they obtained this information in credit reports during the application process. But as of July 1 this year, the Nationwide Credit Reporting Agencies (NCRAs)— Equifax, Experian, and TransUnion—began removing a large segment of the data from their reporting due to unmet identity verification standards per the National Consumer Assistance Plan (NCAP). In an effort to reduce instances of records being matched to the wrong individuals, the NCAP states that public records used in credit reports must possess at least three of the fol- lowing: name, address, Social Security number, or birthdate. According to a whitepaper titled "Linking Liens and Civil Judgments Data" by LexisNexis Risk Solutions, "Approximately 50 percent of tax lien records and approximately 96 percent of civil judgment records do not contain a [Social Security number]" nor do they meet the minimum requirements. erefore, the NCRAs will no longer provide the data. e resulting gap has many lenders worried that they will no longer have a complete picture of an applicant's risk. Further, many secondary mort- gage market investors including the government- sponsored enterprises (GSEs) have not changed their underwriting policies and still require all items be disclosed and resolved before closing. While the NCRAs will no longer provide a full report on liens and judgments, there are other opportunities in the lending lifecycle to obtain this information. However, the associ- ated costs and risks will vary depending on when lenders choose to access the data. Title Search Liens and judgments tied to the property in question will appear in a title search after underwriting. However, by this time, the loan has already been approved with a set closing date, making this a costly and high-risk option. If a record is found, underwriters must contact the borrower to resolve it and rework the loan. If the issue is more complicated, it can cause a closing delay, which creates a negative consumer experience and hurts a lender's ability to retain business. Should the loan fall through, it would be a significant loss for the lender, having al- ready invested around 45 days and, according to a report by the Mortgage Bankers Association (MBA), up to $7,209 in expenses. Soft Credit Pulls After a loan has been approved, lenders may do a soft credit pull to see if there are any changes or cause for concern with the bor- rower, such as large purchases or late payments. ese reports can include liens and judgments. But you can only do a soft pull during under- writing, pre-closing, and post-closing. Like the title search, this may be too late in the process to identify something without the risk of heavy costs and disruption on the path to closing. Liens and Judgments Reports Liens and judgments reports are available for continued access to the data in credit report- ing. ese can be provided as a supplemental report, which will require additional steps and staff retraining, or as an integrated option that fits seamlessly into the lenders' credit reporting solution, allowing them to maintain their exist- ing credit review process. With the information available from the onset, lenders can proactively resolve any items before loan approval, thereby minimizing the risks in moving the borrower forward and ensuring a streamlined process. ese reports do come with a minimal fee, but the benefits of having the information up front greatly outweigh the costs of an unexpected item appearing at the end of the process. ese reports can overcome the matching challenges that led to the credit report content change by using data that is compliant with the Fair Credit Reporting Act (FCRA). FCRA- compliant data has met stringent accuracy guidelines to link public records to the correct consumer so it can be used in underwriting and credit decisions. Lenders can further cor- roborate the data through a verification service like DataVerify, which compares information on a borrower across multiple data sources to validate supplied data and alert to variances. While the removal of liens and judg- ments from credit reports has been a cause for concern, mortgage lenders can be assured that the data hasn't disappeared. ere are options available to access the records throughout the loan process, but it is up to each lender to de- termine how much risk they are willing to take and whether they will obtain the information up front, during the application or further into the loan process, near closing. Ken Viviano is SVP of CBCInnovis, a leading provider of mortgage credit reporting services for today's complex lending environment—from origi- nation to servicing to quality control. CBCInnovis is based in Columbus, Ohio.

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