Ireland’s Biggest Tech Conference Made Stateside Debut

ImageThe 2014 Collision Conference wrapped up in Las Vegas this week, and it lived up to its promise to make waves in the tech community across the pond.. Bringing together investors, startups, prominent public figures, and tech industry veterans in iconic Downtown Vegas, The Summit showcased the future direction of technology abroad, from drones and big data to marijuana and wearables. Judging by the products and services on display, we have a bright future ahead of us.

Moving the Summit Stateside

This was the first year of The Summit in the U.S., but Ireland-based organizer Paddy Cosgrave has been running these conferences for years in Dublin. What started as a small 400-person conference has evolved into an international event with 20,000 attendees expected at this year’s conference, including speakers Elon Musk, Tony Hawk, and Drew Houston, the founder of Dropbox.

Taking this event to Las Vegas was a large undertaking, and Cosgrave partnered with Zappo’s Tony Hsieh to make it happen. Hsieh is well-known in the U.S. for leading (and providing $350 million to help fund) the city’s revitalization efforts of Downtown Las Vegas.  Although some criticize Hsieh’s self-promotion, Las Vegas Mayor Carolyn Goodman quipped during her panel, “if you have $350 million to invest in revitalizing our city, we’ll shower you (with praise) as well.”

A Peak at Solid Paneling

Highlights from the conference included Hsieh and Goodman, but certainly didn’t stop there. Michael Dubin was a crowd-pleaser, using the success of his Dollar Shave Club to illustrate the importance of branding and building trust. Dubin has a great sense of humor that he infuses into his company, and has been celebrated by customers across social media. As a result, 40% of DSC’s customer acquisition is organic.

Evernote’s Phil Libin was also a large draw – every attendee I spoke with praised Libin’s down-to-earth demeanor and straight talk. I was lucky enough to catch a roundtable discussion with Libin regarding dealing with the media, and have never seen an executive so willing to discuss his company so frank and direct in public. Libin also participated in panels on immigration in tech and the future of productivity software.

The Spark Challenge

The most exciting aspect of Collision was the Spark competition, which has yet to be introduced to vanilla Summit. The “Spark powered by Rackspace” saw over 30 technology startups, selected from 500 applicants, battle it out to win a cash prize of $10,000 plus a fund of services. Applicants were rated on 5 criteria: their team, the product/service, ability to disrupt, financials, and the quality of their pitch. The four finalists were both impressive and US-based.

CareLuLu is an online marketplace that makes it easy for parents to find a licensed daycare or preschool. SolePower is developing power-generating shoe insoles for charging portable electronics such as cell phones and wearables just by walking. IMGembed has generated millions of embeds for bloggers and online publishers. AirHelp, who won the competition, is a mediator that negotiates compensation for consumers whose flights have been delayed or cancelled.

Future Collisions

Both Hsieh and Cosgrove hope to make The U.S. Summit an annual event, and nobody’s arguing. Las Vegas is a global tourist destination, and their city council is voting next week to bring a Major League Soccer team to the city. Cosgrove personally led the renovation of The Western Hotel just for the conference, which is appreciated by the local yanks.

With so many VC firms investing in a wide variety of startups, a variety of entertaining after-parties, and sponsorship from Rackspace, Zappos, Belkin, and more, Collision looks to be a game-changer in the tech community moving forward, positioning itself as a CES for startups and disrupters worldwide.

 

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Where to find me…

I no longer update this blog (for now)…you can find more updates on my work fighting the banks, working with Anonymous, becoming a journalist, and more here:

http://thoughtforyourpenny.blogspot.com/2013/07/sizzling-summer.html

Hotwire US

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Anon 2012

Anon 2012.

Hotwire US

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Notes From Today’s Department of Finance Public Force Placed Insurance Hearings

As just your average unemployed consumer…I’d like to present my notes from today’s hearings on the legality of Force Placed Insurance as a product. I personally believe it should be a service and only be allowed a fixed rate for the process of procuring insurance for the borrower.

Anyway, here’s some notes I paraphrased while watching today’s hearing, in case it helps anyone:

Force Placed Insurance is handled entirely by the Force Placed Insurer.

Assurant – 1 – Safety net throughout the United States. He talks really fast, haha. We act on behalf of the mortgage servicer. 13% and 2% Refund rates. (**Refund for that period, but not for the prior term they backdated. It’s only prorated for a year. You’d have to have your insurance agent/company send the bank 3-5 years worth of policies in order to get a full refund.**)

QBE – 2 – QBE Insurance Corp/QBIC, QBE First 3000 employees, headquartered in Atlanta. He’s focusing on Hazard, and not mentioning Flood, Wind, and Auto. Acting on behalf of the Servicer.

(***$200,000 & $130,000 are the highest priced houses in QBE’s portfolio to “show off” having paid. The average house price in the use is $242,000.**)

Meteorological.

DFS: 90% of New York LPI market.

Assurant: Growth from connection with the right clients at the right time (Borrowers in foreclosure).

QBE: High Performance Levels (undefined). 45% in New York.

(**Lawsky is AWESOME!! J Making them compete with insurance companies.**)

QBE: Minimum Loss Ratio so low because catastrophe exposed (**however they’re only exposed to 20% of the dollar**). We would need to readdress our business model.

(**Lawsky calls it a product, but it’s a service. They’re representing the bank and buying insurance for you. They’re just only buying their own insurance.**)

Assurant: Unrealized Losses. History has shown us, it’s always been this way, when the borrower leaves, (**i.e. foreclosed on, why else?**) there’s losses. (**This is REO Insurance, not LPI. They’re funding REO losses with LPI gains**)

QBE: Business tends to be in concentrations of people (**i.e condos**) on the coast (**i.e taller buildings**).

Reinsurance with limited market. Sophisticated models.

Assurant: 50 States. 55% from CAT-Prone States, 2004/2005 were challenging. New York

(**Much higher than the $200k and $135k tragic losses to rebuild he reported earlier.**)

Assurant: we pay dividends and these premiums are a part of it;

A website, call us (**in the name of your servicer, but to the insurance company’s website. Why can’t the borrower just submit their insurance on their bank website. Can you submit your Dec Page on your Bank of America website or Wells Fargo Website or Chase Website?**)

Colorful Inserts

Shortcuts, Huge Spike

Assurant: – We’re Reactive (**not proactive**) Meeting Call Response Time Standards. I’d be happy to walk someone through the process to dispel myths.

QBE: I concur (**Should prove by providing servicer contracts**).

QBE First Accuracy & Error Rate: No, but “extremely high levels of accuracy in the high 90% range”

False Placement Rates are relatively low low 10-12% range

Assurant: Accuracy is track on almost every level. Each process is tracked with a different way of how to do it so the best way is through data reports. We can walk you through it. Exposure Process and lender placement process.

Joy: Describe

Assurant: How we can control false placement. It’s an after event based on the front end.

Flat Cancellation rates.

Change carriers don’t tell servicers. They mention the servicer. Mid teens for escrow/non-escrow

Joy: Who are they talking to?

Assurant: if it’s insurance based in response to a letter or in the client’s IVR are directed to us. (They can never talk to the mortgage company**). Escrow outside of their realm (**although they control the escrow payments, often inflating it**).

Joy: Does Assurant identify themselves as Assurant?

Assurant: It’s client driven. The expertise shouldn’t matter. I think sometimes we identify ourselves (**although ONLY to other insurance companies, not to borrowers, except through letters**). (**It also matters because borrowers can’t submit to the lender website**).

Ben: Why reinsure?

Assurant: Client Reinsurance, Market Reinsurance finances Catastrophe Reinsurance.

Joy: Actual loss ratios over the last 6 years?

Assurant: I don’t know.

Joy: Can you explain why you haven’t lowered the payments?

Assurant: Certainly, clearly you can tell in looking at the Loss Ratios. Driven by losses and premium. Premium has gone up.  There is merit in reviewing. Understanding current conditions from a premium standpoint and unrealized loss for the future (**but what about the past?**)

Joy: Captive insurance.

Assurant: It’s an economic decision. The clients (**not borrowers**) want to do it. It makes sense.

Joy: Help me understand this arrangement aligns the servicer’s interest rather than the homeowners?

Assurant: Why would it be disparate?

Assurant: We don’t see it as an avenue to move profit to clients except the rate would be the same to the borrower either way.

Can’t disagree it’s worked out based on experience.

Joy: Thank you (**no, Joy….Thank YOU!!**)

Why would they pay commissions related to LPI?

Assurant: Over the years it’s been accepted and approved. It’s always been there.

Joy: Do they perform services for these commissions?

Assurant: It varies by servicer. There’s a number they perform. Short list:

Manage rating program

Manage audits

Lender property compliance

Review of all insurance documents

It’s an insurance product with improved commissions.

Joy: Commissions paid were equivalent to Insurance agents in voluntary homeowners market.

In terms of Force Placed and authority is placed on you, you don’t provide significant services.

Assurant: I’ll address it again, there’s a number of services. We watch ourselves.

The clients audit us.

Joy: Profit? Exhibit A

$305 million from 2006-2010

Dividends and profit $106 Million

33% profit

How do you justify these profits in light of projecting a 5% profit.

Assurant: The experience has been better.

Joy: Does LPI contribute?

Assurant: That’s presumptive. I don’t know. I can tell you that uh, if you look at the property the amount of insurance on delinquent loans, most of that come after the loan is already delinquent.

Lion’s Share is put in after rather than before.

Joy: Document Retention Policy resulted in the destruction of emails related to this hearing?

Assurant: I don’t know what kind of documents were destructed. We require what we’re required to retain.

Joy: Has Assurant discussed LPI by email?

Assurant: I would assume so.

Joy: Since then, have you revisited doc retention?

Assurant: We have temporarily suspended the 45 day email procedure pending further dialogue.

Ben: Given your corporate development history:

Empire Fire and Marine created Force Placed Insurance Product in 1997.

The day to day operation of managing that product taken over by ZC Sterling.

In Dec 2008, QBE Insurance purchased ZC Sterling and changed to QBE First.

In 2009, QBE bought Empire Fire and Marine.

QBE: We did not take over their portfolio.

Ben: Ok, once you bought QBE, did ZC Sterling continue to operate the portfolio?

In 2009 they submitted a rate filing with the rates. The rates have never been challenged to date. There’s always a first time for something.

Let’s look at QBE rate filing.

QBE has no experience, it’s adopting Empire Fire and Marine program.

We’d like to see the confidentiality agreement.

27.5% commissions paid to own affiliate QBE First.

QBE First manages process, adjudicates the claims and losses.

Lower loss ratio, more QBE First makes from QBE.

Competitive confidentiality.

Rate Filings

Aspects include lump sum payments

Servicers have insurance agent affiliates and you pay commissions

Amsi 10-20% on premiums paid

Commissions are consistent with commissions paid to voluntary agents. What’s the difference between LPI agents vs a voluntary. Product shopping, etc.

QBE: I believe it is similar. You read a portion. I would suggest the stuff you suggest would be a similar venture.

Ben: Let’s talk about Balboa / Bank of America

Joy: Did Assurant pay GMAC?

Assurant: They’re not a client of ours.

Ben: Back to Balboa. They entered into an agreement with QBE that Is 100%. Balboa exists

And shifts to QBE, the public was $700 million paid by QBE to Bank of America (actually was only $700 million cash plus another $1.5 billion in assets).

Balboa is a very significant acquisition. It brought you from 3rd in line to 2nd in size.

There were other components. In particular, there was a 10 year agency agreement between QBE and Bank of America or Balboa?

QBE: I don’t know the signatories.

Ben: But Bank of America family companies including a commission that gets paid from QBE to the BofA folks for a period of 10 years. It’s been structured as net premiums.  Speak into the mic.

In grappling with this, this creates an incentive to place further policies. They Service 20% of mortgages in the United States. There’s a correlation.

QBE: What’s important to understand is the process is blind to the individual or situation other than the fact that the process looks for lapses in insurance products.

Ben: Is there a relationship to the bottom line? That’s impersonal as well. I’m trying to get an understanding of a percent premium to Bank of America. 8 year relationship agreement as well.

That results in a payment from QBE to Bank of America based on volume. A half a billion dollars to Bank of America

QBE: We’d be happy to talk to the people involved.

Ben: What the public perception is there’s intended (**video cuts out**). Folks view this as inter related.

We’re trying to get an understanding of what the incentives are that control this.

Economically it has an enormous impact.

My last question, what’s the percentage of claims paid as a function of claims made?

100 claims filed, what does QBE pay on average?

QBE: We can try to do some research. Not that I’m aware of. Can we go back and research it?

 

**Tomorrow from 10 AM-5 PM

Chase’s servicer is refusing to show up.

Representatives from Bank of America, Bank of America Insurance, and Balboa will be present**

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Dissecting Fannie Mae’s Rules…

Below is a brief dissection of Fannie Mae’s much touted Force Placed Insurance “Rules”…Please do not pay attention to the man behind the curtain…just go on with your business…

Fannie Mae intends to place one (1) or more Lender Placed Insurance Providers on a Preferred Provider List and then communicate that list (including agreed upon pricing) to Fannie Mae’s Servicer community.

***Nowhere is it stated that this list will be communicated to borrowers.***

 

The scope of the Lender Placed Insurance services to be provided will include, at a minimum, the following activities:

  • Provide insurance coverage upon request from a Fannie Mae Servicer or the agent of a Fannie Mae Servicer

***This is an empty gesture. It is only in rare cases (such as an uninsured loss in which the investor or loan servicer stands to lose money) where the investor or loan servicer will actually send a request to place coverage on a loan. The majority of the time, it’s Assurant/QBE issuing the force placed policy since they are the only party tracking insurance on the mortgage.***

  • Process and pay legitimate claims whether originated from a Fannie Mae Servicer or a homeowner

***The force placed claims abuse will still remain. Assurant/QBE already process claims for the investor/servicer. Since they are also the companies underwriting their own force placed policies and they are aware of duplicating coverage due to them also being the insurance tracker, the claims are always filed against preferred policies over force placed. This “rule” does nothing to stop that.***

  • Communicate quickly the results of claims review and make payments in a timely manner
  • Issue timely invoices and process payments received for Lender Placed Insurance services

*** Assurant/QBE takes Force placed payments directly out of borrower escrow accounts (creating an escrow account without borrower authorization where one doesn’t exist) as again they are the insurance tracker.***

  • Comply with all applicable state and federal regulations that apply to the Lender Placed Insurance business
  • Provide insurance customer service to homeowners, Servicers and Fannie Mae to include call center operations
  • Maintain books of record necessary to manage the scope of services covered in this RFP to include issuing accurate reports of operating data to both Fannie Mae and its Servicers as described below

*** As my email leak with Anonymous last March clearly shows, the “books of record” are already being illegally manipulated to cover up any mistakes. This is once again an empty gesture.***

  • Provide robust reporting to offer increased transparency and accountability 

*** Reporting is already robust. Every single keystroke in any system is recorded by various tracking systems. These systems are just hidden, and the reports are not monitored regularly by anyone who can do anything about it. FNMA’s intervention in this matter will do nothing to change any of this. The loan servicer/insurance tracker in most cases isn’t even able to make changes to reports without making a request to the Fidelity Information Systems Powercell ***

4.1.1.1 Lender Placed Insurers must be rated A X or better Financial Strength in A.M. Best Company’s Insurance Reports.

***They all are…because Lender Placed Policies have the lowest payout…because they are all committing fraud***

4.2.1.4 Lender Placed Insurer’s policy exclusions shall be limited to those listed in Attachment E.

***Where’s Attachment E? I’m curious to see the exclusion limitations and how they affect factors such as condos, landlords, etc***

4.2.1.6 All Lender Placed Insurance products claims reimbursement shall be based on replacement cost.

***If claims are limited to replacement cost does this mean the amount of insurance placed will be based on replacement cost? This is currently not done as the replacement cost is normally less than the loan’s principal balance. Some lenders place force placed insurance based on last known hazard, which will actually be more than even the principal balance unless the borrower renegotiates this amount with the insurance company/loan servicer on an annual basis.***

4.2.1.8 In the event that the homeowner provides evidence of acceptable insurance coverage, the total amount of Lender Placed Insurance premiums shall be refunded from the date that acceptable coverage was issued. The refund shall be paid on a pro-rated unearned premium basis and returned to the homeowner within 15 calendar days.

***There is rampant abuse in what is considered “evidence acceptable insurance coverage”. For example, if your loan servicer (who again is actually the insurance tracker) determines your policy from 1/1/12 – 1/1/13 is suddenly not sufficient and you’re sent a letter notifying you that as of 3/1/12 your insurance has been determined to be insufficient, the evidence of insurance you submit must have a print date of 3/2/12 or later, otherwise the forms you mail/fax to your insurance servicer will be ignored. It is also important to note that you, as the borrower, are providing this evidence to Assurant/QBE, NOT your loan servicer or investor.***

4.2.1.9 Lender Placed Insurance can be terminated on a loan at any time by the Servicer for any reason. There shall be no fees tied to policy termination or any minimum time requirement. If a policy is terminated before natural expiration refunds shall be paid on a pro-rated unearned premium basis based on the date the policy was requested to be terminated. The refunds shall be returned to the homeowner within 15 calendar days

*** This still allows a servicer to backdate coverage and only issue partial refunds.***

4.2.2.4 Provide Telecommunication Device for the Deaf (“TDD”) services or other related services to support hearing impaired homeowners contacting Insurance Tracker’s call center representatives.

***This is already a Federal law per the Americans with Disabilities Act as far as I’m aware. Funny enough, I was a TDD Relay Operator prior to working for Balboa/Countrywide/BAC.***

4.2.2.8 Make Lender Placed Insurance proceeds payable to the homeowner and Servicer when homeowner is active in the claim process.

***How is the homeowner considered “active” in the claim process? This is why I ask…if the homeowner is not considered “active” in the claim process, then the only logical party that could have initiated the process is your loan servicer. In what real world scenario can you ever imagine in the endless possibilities of the universe in which there should ever be a claim for damage on your home that you are not aware of? Why would your servicer be filing a claim on a property without your knowledge? If it is because the damage happened after you are foreclosed on, why are you responsible for paying the premium for insurance on a house that the bank says you don’t own?!?!?! There is rampant fraud occurring at this point in both Home/Auto, and this provision does nothing to change that.***

4.2.2.9 Make Lender Placed Insurance proceeds payable solely to Servicer where the property is vacant, the homeowner cannot be located, or a Proof of Loss claim has been filed.

***Once again, what is a real world scenario in which a property is vacant and the homeowner cannot be located that isn’t a foreclosure situation, and once again, if the bank says you don’t own the home, why are you responsible for insuring it? You can’t have it both ways. These regulations are continuing to allow this. Also isn’t a Proof of Loss ALWAYS filed?!?!?!***

4.2.2.12 Cooperate with Servicer to audit active and closed claims. Random audits will be performed to measure general compliance with law, regulation and the Fannie Mae Guidelines (Attachment B). Additionally from time to time special purpose audits will be performed to review actions taken on a specific account or set of accounts. 

***Again, the leak I did last year showed conclusively the willingness of insurance trackers to hide and adjust system of record information during audits (in order to maintain contractual Service Level Agreements, comply with Federal law, etc) so this is just another empty statement.***

4.3.1.2 All Hazard Insurance must include windstorm, hurricane, and hail coverage as required in the Fannie Mae Guidelines, Part II, Chapter 2: Hazard Insurance (Attachment B).

*** Why? This isn’t done for voluntary insurance. There are specific states (Florida, Hawaii, N/S Carolina, etc) where wind/hurricane/hail coverage is required, but why is it required for borrowers who weren’t previously required to carry this coverage? In addition, Wind/Hazard is tracked as separate policies in these states, as a preferred carrier will not write both on the same policy in Florida for example. Now, knowing this, if your servicer determines you lapsed on your hazard, but your wind policy is still in place (or vice versa), you have been purposefully given duplicate coverage. You as the borrower are the only person able to cancel your voluntary policy. The insurance agent will never cancel an insurance policy by request of the servicer/tracker/investor. Once again, the borrower is still screwed.***

4.3.1.4 Provide Hazard Insurance for all Fannie Mae Planned Unit Development (PUD) Project loans as requested and comply with Fannie Mae Guidelines, Part II, Chapter 2, 204: Coverage Required for Units in PUD Projects

4.3.1.5 Provide Hazard Insurance for all Fannie Mae Units in Condo Projects as requested and comply with Fannie Mae Guidelines, Part II, Chapter 2, 205: Coverage Required for Units in Condo Projects

*** PUD’s & Condo master policies are normally covered by the HOA/Condo Association Master Policy (which rarely cancels) Again, it is Assurant/QBE which is tracking these Master policies. In addition, a Master Policy “Cancellation” is applied to every loan determined to be in that condominium complex, however a Renewal, Declaration, Endorsement, etc, is the responsibility of each individual homeowner. Rampant servicer abuse will still be allowed.***

4.3.2.2 As indicated in Fannie Mae Guidelines, flood insurance is only required for properties located in an SFHA flood zone (Attachment G).

*** Flood zone discrepancies between the servicer, insurance tracker, voluntary insurance company, FEMA are rampant. In addition, the determination is normally done by Landsafe. When I worked at Balboa, I sat right next to the Landsafe department for a year, just another in a long line of servicer abuses.***

4.3.2.4 Provide Flood Insurance for all Fannie Mae Units in Condo Projects as requested and comply with Fannie Mae Guidelines, Part II, Chapter 3, 306.01: PUD Projects (Attachment B).

4.3.2.5 Provide Flood Insurance for all Fannie Mae Units in Condo Projects as requested and comply with Fannie Mae Guidelines, Part II, Chapter 3, 306.02: Condo Projects (Attachment B).

4.3.2.6 Provide Flood Insurance for all Fannie Mae Units in Cooperative Projects as requested and comply with Fannie Mae Guidelines, Part II, Chapter 3, 306.03: Co-op Projects (Attachment B).

*** Biggest customer complaint…Even if your condo is located in a mandatory flood zone (currently flood zones A_ _ and V_ _) why would it matter if your condo isn’t on the ground floor?***

Critical Performance Indicator (CPI)

***Ironically, to the force placed insurance providers LPI (Lender Placed Insurance) is force placed insurance on homes and CPI (Collateral Protection Insurance) is force placed insurance on automobiles.***

Executive meeting between Fannie Mae and the Lender Placed Insurer (See Section 4.6.1.1). Performance Credit issued to the Servicer (See Section 4.4.1.1)

***If the Lender Placed Insurer makes enough critical mistakes to enough homeowners, why is the retribution given to the Loan Servicer and not the Homeowners?!?!?***

4.4.2.2 Minimum Service Level: 95% of binders placed within Three (3) calendar days

4.4.2.3 Minimum Service Level: 98% of premium refunds processed within 15 calendar days

***Force Placed Insurance Placement/Cancellation is the exact same process performed by the exact same departments…why is the placement done within 3 days and the cancellation/refund processed in 15 days? The Insurance Tracker (who, again is the force placed insurer) has direct access to the borrower’s escrow account.***

4.4.2.4  KPI: Elapsed time between claims notification and initial settlement (excluding payments of recoverable holdback)

***Previously it was stated that claims be paid to RCV (Replacement Cost Value). If this is true, then how is there a recoverable holdback? It’s my understanding that can only be done by paying the ACV (Actual Cash Value). Why are these payments being singled out if they can’t even exist by Fannie Mae’s own rules stated earlier in this document? Annnnnd again…why is the borrower not being compensated for this? Why is it only FNMA?***

 

4.4.2.5 Definition: Elapsed time between the 10th of the calendar month and time in which Fannie Mae confirms they have received the monthly management report

Minimum Service Level: 100% of reports delivered within two (2) calendar days

*** Monthly reports are currently provided to the servicers by the 5th calendar day of the month at the absolute latest (with many being due much earlier) By giving the Force Placed Insurer until the 12th of the month, FNMA is allowing the Force Placed Insurer ample time to prioritize and implement any changes necessary in order to fake compliance. This is absolutely ridiculous as all reports can be 100% automated and procured through Fidelity, etc without the Force Placed Insurer ever having any hand in the process whatsoever. Essentially they are letting students grade their own take home tests (and take their time doing it as well).***

4.4.4.1 Operational Report: Provide a weekly Lender Placed Insurance refunds report to the Servicer. The report shall include (without limitation) the: loan number, homeowner’s name, policy number, coverage type, premium amount, term of coverage, cancelation date type of refund/credit and earned premium amount/credit amount. This report shall be provided to Fannie Mae directly upon request.

4.4.4.2 Operational Report: Provide a weekly Lender Placed Insurance premium payment request report to the Servicer. The report shall include (without limitation) the: loan number, homeowner’s name, policy number, coverage type, coverage amount term of coverage, state, and requested premium amount.

4.4.4.4 Data Request: Provide a weekly file to reflect the status of Lender Placed Insurance issuance of policies.

4.4.4.5 Data Request: Provide Servicer and Fannie Mae all documentation for active and closed claims upon request in a timely manner.

*** Not only do all parties involved already know they already have access to this information…they also all have access to archives of the information going back to the 1980’s (including what is archived on paper at Iron Mountain). This is why FNMA doesn’t bother to outline the report details, etc like they do in item 4.4.4.7, which is the only actually new report that is being created in this section.)***

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A Layman’s Guide to ERM Strategy Chapter 1 – Know Your Enemy

Ahhh the MBA…the Rooks of the Corporate board…

I’ve never wanted an MBA myself. I imagine at this point in our society you have to be given a blanket understanding of Enterprise Risk Management in order to receive so much as a Bachelor’s degree. Maybe you even work on a group project. By the time you’re reaching toward an MBA though, I hope by now you need to display a mathematically sound mind and a thorough understanding of ERM planning and optimization techniques.

ERM is a very dry subject to study if you don’t embrace it artistically. It’s a very complicated and high level system science that requires a high level of intelligence, creativity, and courage to even begin to comprehend practically. Many believe they do understand, but there are system nuances, such as discrepancies and undefinable variables, that can only be understood from a series of logical practical applications within a large enough pool of assets. The knowledge can be gained forensically or in a formulaic manner, however it takes a much longer time to obtain a “working knowledge” of the applicable usage, and therefore, we come to our first flaw of an ERM system.

The Pest Can Adapt More Efficiently Than The Poison

This is the first concept you need to understand to gain practical knowledge in the field of ERM. To give a reference point of understanding, this same concept served as an underlining theme of the Batman graphic novels, comic books, and pop cultural influences in the decades surrounding the new millennium: Setting the size of the system as a variable, the ratio of the rate of effectiveness of a vigilante vs the rate of effectiveness of a regulated defense will always move exponentially toward the vigilante’s favor as the system grows in size, with the inverse being equally true. It is important to recognize the moral and ethical difference between a vigilante and rebel. To understand practical applications, we need to move on to another pop culture icon – Star Wars.

Every Death Star Has Holes

In an unstable 1970’s US economic climate, technology began to adapt to society. During this time, Star Wars: A New Hope introduced a worldwide audience to a basic strategy within any system. You can’t build a Death Star without holes, and on the flip side, just because a Death Star has holes doesn’t make it any less effective.

As we moved into the 1990’s and students of business, law, science, and math, who had this early ERM concept embedded in their imaginations as children, were beginning their ascent up the corporate and political ladders viewing the system as a Death Star, and flying through the canyons. After the destruction of the Bell Dynasty during the Clone Wars, the Death Star was redesigned. It would be a much tougher battle, and the weakness wasn’t immediately clear.

A small group of vigilantes, however, located the hole in the Death Star once again, but this time the damage was greater, with giants like WorldCom and Enron falling victim to a lack of preparation in this important area of risk. Titans of industry still prevailed by wisely focusing resources into the risk study and eventual creation of (The Force) official ERM practices and procedures. It took another 7 years before another hole was found within a Death Star in the form of the 2008 mortgage crisis. ***Note – I understand the timeline doesn’t match right between the 2 here. I’m just getting your mind to understand the variable assignment. Don’t hate.

The Death Star, however, proved itself with formidable defenses. The hole was carefully guarded by squadrons of TIE Fighters (Lobbyists), Mounted Turrets (Attorneys), and Elite soldiers (Compliance Specialists). Canyons now wind through a seemingly impassible maze…but there’s still a hole, however small and guarded, there is always a hole…

General Dodonna: Well, the Empire doesn’t consider a small one-man fighter to be any threat, or they’d have a tighter defense. An analysis of the plans provided by Princess Leia has demonstrated a weakness in the battle station. But the approach will not be easy. You are required to maneuver straight down this trench and skim the surface to this point. The target area is only two meters wide. It’s a small thermal exhaust port, right below the main port. The shaft leads directly to the reactor system. A precise hit will start a chain reaction which should destroy the station. Only a precise hit will set off a chain reaction. The shaft is ray-shielded, so you’ll have to use proton torpedoes. 

Wedge Antilles (Red 2): That’s impossible! Even for a computer. 

Luke: It’s not impossible. I used to bullseye womp rats in my T-16 back home, they’re not much bigger than two meters. 

General Dodonna: Then man your ships. And may the Force be with you.

To get your mind ready to think, visualize the correlation between the metaphor of the movie quotes and your existing knowledge of ERM systems. If you are having trouble, try to relate it to matters of security, corporate or otherwise. Use any business knowledge that will help your mind identify the important focal points of each side and understand the relations between the 2 concepts.

Admiral Motti: Any attack made by the Rebels against this station would be a useless gesture, no matter what technical data they have obtained. This station is now the ultimate power in the universe! I suggest we use it!

Darth Vader: Don’t be too proud of this technological terror you’ve constructed. The ability to destroy a planet is insignificant next to the potential of the Force.

Star Wars buffs know that Admiral Motti is an officer who is punished at the hands of the resident ERM practitioner very shortly after the words are uttered. An effective ERM system accounts for this variable within it’s formulas to ensure this is the end result, and an effective Public and Media Relations team can relieve the damage by ensuring the weapons of the Death Star are camouflaged within it’s friendly moon shape. The larger the system, the more intimidating it becomes. You must appropriate resources into assuring the acceptance of the system into all existing systems. You want to build a Death Star instead of an Iron Giant.

This is a huge risk to carry, and thus Insurance is placed on results of concept designs, which I imagine are patented, and Texas Hold Em is played by those in control of the resources as to who has developed the best methods of Defense utilizing different combinations of the above mentioned variables, much like several popular strategies utilized in the game of Chess. You can visualize Star Wars Chess if it helps…or even Wizard Chess, but the basics are the same no matter what skin you place on it.

The reason I used Star Wars for this particular explanation is because it’s a widespread and accepted metaphor with which a large percentage of the populace can access detailed enough knowledge to bridge the gap through any misunderstood concepts in order to understand the relationship as a whole.

In comparing/contrasting the relational variables in this metaphor, the Death Star (ERM system) can not contain all possible values of The Force (ERM concepts). There will always be an ability for a Disturbance (Undefined variable) in the Force. In order to succeed, the Death Star needs a system of detecting and categorizing these Disturbances as Bounty Hunter (Vigilante) to incorporate/negotiate with or Rebel (Virus) that must be attacked/defended against. Once categorized, different strategies are implemented against the Disturbance.

In the next few chapters, we’ll review how the variables were effected throughout the Star Wars Trilogy as we know it, and we’ll begin to explore key points that effected the outcome. It is important to examine these key points in order to understand which variables be effected by understanding the effect of it’s outcome on the other points. At some points, the outcome will not matter (quick, who shot first, Han or Greedo?), and at others, it will be difficult to assess the associated risks (If Luke and Leia were switched at birth, what else in the movies would’ve been effected?).

By the time you’re done reading through all of this, you’ll be ready to answer even some of the most complicated ERM-related questions by learning how to relate the common principles to practical usage examples ranging from day to day decisions, pop culture references, and slowly into business case studies. At the end, we’ll come up with some case studies of our own and see which strategies work best in which industries and which variables have the greatest impact on the system as a whole.

For now though, It’s the time between Cinco de Mayo and Mother’s Day so it’s time for siesta. Maybe I’ll use the Terminator for the next part. I’ll be back, haha :)

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Insurance Fraud 101 (Home, Commercial, and Auto)

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It’s time to take a look at the basics of insurance forms so you can understand how it is the banksters commit fraud and charge you erroneous premiums. Whether you have a bank loan for a house, condo, mobile home, townhouse, automobile, farm/commercial equipment, or a commercial property, you are required by the terms of your loan to carry insurance of some type. The Acord form may look familiar to you:

This is a generic form utilized by the majority of insurance companies for all types of correspondence, however some companies do utilize their own proprietary forms. Either way, here are the basic form types, along with how your loan servicer (listed as lienholder on the insurance document) handles them:

Binder/Application – Typically this form is sent to your servicer to confirm temporary coverage (90 days or less). The form has a bunch of legal information which varies by company, state, and type of lien, but the basic idea is that this document notifies the bank that you have applied for insurance coverage, and they will receive a copy of the actual policy soon.

When your loan servicer receives this document, a hold is placed on your loan to stop any forced Lender Placed Insurance (LPI) activity until the Expiration Date or 90 days from the Policy Effective Date, whichever is sooner. If the servicer does not receive a copy of the policy from you, your agent, or the insurance company prior to this date, an LPI policy will be forced on your account. Whether you have an escrow account or not, one will be created for you, and it will be made negative by this premium, with absolutely NO EXCEPTIONS!

Declaration/Certificate of Insurance/Evidence of Insurance – This is the main form utilized by your insurance company to notify the bank that you have a valid insurance policy. The specific form used will depend on the type of collateral they have a lien on (home, condo, auto, etc). These documents come in many different forms. You may have an umbrella policy (a single policy which covers your home, vehicle(s), etc), a HOA/Master policy (a group policy obtained by an Homeowners or Condo Association), Homeowners, Dwelling Fire, Liability, etc.

Whichever form your insurer uses, you need to be aware of a few important points:

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1) The loan servicer will always do everything in their power to ensure they are listed as the lienholder on your policy.

2) If your policy term (Effective Date to Expiration Date) is more than 12 months, your loan servicer will only input a 12 month term. It is important that you send your loan servicer a copy of your policy every 12 months to avoid any erroneous forced LPI activity on your account.

3) If you ever receive a letter stating that you do not have valid insurance, you Must send your loan servicer (listed as lienholder on your insurance policy) a copy of the policy with a print date that is More Recent than the print date of the letter. If not, the servicer will disregard your valid policy and charge you for a forced LPI policy.

Endorsement – This form is similar to the policy form. It notifies the bank of any changes to your policy (effective dates, coverage amounts, etc). The one exception to this rule is a Deletion of Lienholder Interest, which will be discussed below.

Bill/Cancellation – These forms are often interchangeable, as if you do not pay your bill, the policy will cancel. The general idea is that your insurance company sends your loan servicer/lienholder this form when the policy is cancelling for one reason or another.

How a loan servicer treats this form depends on the cancellation date (or billing due date) and whether or not you have an escrow account. If you have an escrow account, and the date is in the future, the form is forwarded to the Cash Management and Distribution Management departments in order for them to issue a check to your insurance company out of your escrow account to pay your bill. In every other scenario, a forced LPI policy is placed on your account effective the date of cancellation, and you are charged for the premium.

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This point is where the majority of the insurance fraud by your bank against you occurs. Here’s how:

A Deletion of Interest is printed on a cancellation form, and is therefore treated by the loan servicer as a cancellation.

If you paid close attention to the rules above, the LPI policy that is forced on your account and charged to you is often backdated regardless of whether or not you have a loss. This is a highly illegal practice that will actually be documented on the force placed letter you receive from the loan servicer.

A Deletion of Interest is sent to your bank in the following scenarios (the majority of which are completely out of your control):

Your Lienholder sells your loan to investors

Your Lienholder sells the servicing rights of your loan to a loan servicer

You pay off your loan and file a certificate of lien release

Your Lienholder/Loan Servicer changes processing center addresses or PO boxes

Your Lienholder is bought by another bank

As you can see, without any intervention, miscalculation, or mistake on your part in any way, the banking and insurance regulations set for your bank have now caused your escrow account (whether pre-existing or not) to become negative, even if you already paid off your loan, due entirely to circumstances created by your bank. This occurs tens of thousands of times every single day in our country to honest and hardworking American citizens, causing many to have their home, vehicle, or investment property taken away from them illegally by the bank.

If you are in the position where you may lose (or may have already lost) your property, whether home, auto, or commercial, study any correspondence you have received from your bank. You may have the system-generated written proof of their fraudulent and illegal (per the Gramm-Leach-Bliley Act) activities already in your hand in the form of a force placed policy notification form where the effective date of the policy is older than the print date of the letter itself. Bring this to the attention of an attorney immediately.

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