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   ARTICLE   |   From Scotsman Guide Residential Edition   |   September 2010

How to Prep for Call Reports

Expected passage of a reporting rule may mean more record-keeping for you

Beginning some time next year, mortgage brokers likely must start filing Nationwide Mortgage Licensing System (NMLS) call reports. A proposal for such reports released this past March responds to a mandate in the Secure and Fair Enforcement for Mortgage Licensing Act (aka, the S.A.F.E. Act) and intends to standardize licensed mortgage companies' reporting of loan activity in each state.

"If implemented as proposed, call reports would include the total monetary loan volume and number of units for each individual loan originator who operates under the reporting mortgage brokerage. "

Although final guidance regarding call reports has not appeared as of press time, it's not too early for mortgage brokers to develop a plan for building the reports into their business operations. By preparing for the new requirements proactively, brokers can give themselves more time to adjust and avoid time crunches later.

What is a call report?

The NMLS proposal laid the groundwork for call-report requirements. A public-comment period closed this past May. 

If implemented as proposed, call reports would include the total monetary loan volume and number of units for each individual loan originator who operates under the reporting mortgage brokerage. The reports would include information for the brokerage owner or managing broker's origination activity. Brokers would be required to provide  information specific to each state's regulatory authority. 

The NMLS proposal included reporting requirements for the following activities during each quarter:

  • Number of applications received
  • Number of applications denied
  • Number of applications withdrawn
  • Loans brokered
  • Applications in process at the beginning and end of each quarter

Broker companies and lenders would need to provide information about the types of loans brokered or funded and totaled by type. Loan categories would include purchase, refinance, Federal Housing Administration, U.S. Department of Veterans Affairs, Fannie Mae, Freddie Mac and U.S. Department of Agriculture. Other loan characteristics such as adjustable rates, balloon payments and negative amortization also would be required in the reports.

Loans in process would include all applications that meet the U.S. Department of Housing and Urban Development's requirements for mandatory issuance of a good-faith estimate.

State regulators likely will use the call reports in loan-originator-licensee investigations. The reports likely will include two parts:

  1. Licensees' mortgage loan activity
  2. Licensees' financial information

If regulators implement the call-report proposal as planned, brokers must file reports within 45 days of the end of each quarter. In practice, this would require brokers to collect mandated data with each loan file and maintain organized financial records. Trying to catch up with record-keeping at the end of each quarter could prove disastrous.

Call reports, however, needn't be expensive or time-consuming. In fact, their impending implementation marks a good time to evaluate your current systems and integrate processes. 

System options

Brokers can ease the transition to call reports and promote their accuracy by using or developing software systems that code each transaction with required attributes at origination and throughout processing. These systems can include a flexible way to code a loan with specific attributes and generate a report with all loans and their associated attributes at the end of each reporting period.

On the Web

Nationalwide Mortgage Licensing System's call-report proposal: www.sctsm.in/CallRprop

Another way to track and report your business's activity is to use a loan-origination system that creates lists of loans based on which required reporting elements they meet. These lists can automatically call on data inserted in the system as the loan is processed.

Either system should be flexible enough to allow users to add, delete or edit attributes as required by file changes.

Consider including trigger points, moments at which attributes can be created based on loan-file changes. Also, note that attributes displayed visually will allow users to see if mistakes have been made or if loans are misclassified. The best systems will include validations that identify and correct mistakes.

Minimizing the time required to prepare call reports can keep brokers focused on mortgage origination rather than legal technicalities. This is also true when it comes to preparing required financial statements. In some cases, brokers may decide that hiring a certified public accountant to help with that aspect of the reports is worth the expense.

Although final call-report requirements is unknown as of press time, the intent seems clear. Implementation likely will occur in 2011 -- and by preparing now, you can avoid the hassle of meeting new requirements on a tight deadline.


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