Aug. 24: State law changes; letters about comp, ransomware, and borrower disposable income

Comp? Cyberattacks? Changes in underwriting philosophy? A look through my email inbox indicates they’re on folks’ minds this week. And let’s throw in some state-law changes. Just because Congress is on recess doesn’t mean states are idling.

Compensation

It’s a rare thing when someone doesn’t know what they “should be” earning. Few companies work in a vacuum, although sometimes the knowledge flow isn’t always efficient. While capital markets staff scrap to pick up a few basis points here and there, compensation levels at most lenders continues to be viewed as hefty. “Hey, without MLOs, those folks in capital markets wouldn’t have anything to sell!” So lenders have gradually cut mid-level managers and increased productivity levels for originators, e.g., raised minimum production numbers.

According to STRATMOR’s Spring 2019 Compensation Connection Study, 67 percent of Regional Sales Manager Personal Production Incentives were based on the same tiers as Loan Officers in 2018. You can get basic salary compensation information from a host of HR-based providers, but what you won’t get from them is why the compensation for mortgage-specific roles is different than other industries. STRATMOR’s Compensation Connection Study provides compensation information for all roles, including those that are unique to the mortgage industry, from sales to post closing and for both Independent and Bank-owned lenders. And, because there is more to compensation than salary, Compensation Connection provides details on incentives and benefits paid (like bonuses, educational allowances and time off) giving you the information you need about the market to build a compensation plan to attract and keep the right people. Don’t miss this opportunity to have the most mortgage-specific compensation information available. Sign up for the 2019 Compensation Connection Study today!

Bart B. writes, “Regarding LO compensation, let’s be real, too many loan officers and mortgage companies want to earn as much money as possible with the least amount of work. Given the opportunity to charge a client more points & fees or direct a borrower to a rate or loan program to earn a greater commission, they will charge the borrower a lot more often than you think. Too many LOs took advantage 30 years ago and too many will take advantage today.

“I worked in Secondary Marketing for 23 years at banks and mortgage companies. I experienced first-hand how many LOs would lock a rate with the highest rebate and/or charge the most points possible, so they could get rich at the expense of the borrower. Each borrower trusts the LO to either get them a fair or the best deal. In addition, the realtors don’t compare different lenders rates, fees and loan programs. They refer borrowers to the LO because they’ll get the loan closed at all costs. And, too many realtors want something from the lender for referring the borrower to them, such as free advertising, tickets to a pro game or free boat rides. Based on my experience, 5% of realtors try to help their clients get the best mortgage loan.

“The reason I started my mortgage consulting/coaching business several years ago was because I saw too many LOs direct borrowers into FHA or sub-prime loans to earn greater commissions. Too many other borrowers didn’t know how to compare rates, fees and programs, so they asked the realtor or friend for a lender based on trust and experience. Too often I can beat the realtors recommended lender at .25-.50% in rate.

“Why do so many borrowers search for a lender on their own, before and after meeting with a real estate agent? Because, they don’t trust the realtor to recommend a competitive lender. The LO comp rules are not great. They need to be improved. But they need to be in place to protect the borrowers. I put in place an LO comp plan some years back. It removes all of the issues mentioned above provides incentive for the LO to provide the best solution for the borrower.

“Moreover, I am greatly annoyed by the ads I see touting 15-year mortgages as a ‘benefit’ to borrowers. The slightly lower interest rate on a 15-year mortgage is way too insignificant to offset the increase in payment due to the lower amortization period. On a $200,000 loan, for example, the payment at 3.75% for a 15-year mortgage is $1,454.44 compared to $954.83 at 4.0% on a 30-year mortgage. That is a sufficiently large enough increase to make the mortgage unaffordable for many borrowers.

Risk

IT experts will tell you being hacked is a question of “when” and not “if.” I received this reminder from Michael Steer, the President of MQMR, SQC, and HQVM. “We encourage our clients to remember the importance of cybersecurity, and the consequences of ignoring it. Lenders still aren’t doing enough and should be performing IT risk assessments and audits on an ongoing basis to see where their weaknesses are, something MQMR covers as either part of our internal audit program we set up for clients or a standalone IT audit. During a recent session at TMC’s conference, we touched on ransomware and leveraging phishing services, such as KnowBe4 (a service that MQMR personally uses to educate our employees), to bring awareness to users across an organization about clicking on malicious links/emails. I’m a raving fan of the informative blog Knowbe4 puts out every week. Here’s a link for people to sign up (free!) to learn more about cybersecurity threats.

“On that same topic of ransomware, here’s another article about ransomware attacks, this time in the great state of Texas. Given the amount of information that mortgage companies and mortgage vendors have, it’s extremely important that we, as an industry, continue to share best practices and bring awareness to everyone. We’re only as strong as our weakest link. No cybersecurity program is bulletproof but educating frontline users, putting in controls to mitigate risk, and constantly assessing/testing the infosec program is important. Here are two FAQs we published within the last year that highlight some simple but effective best practices: “IT Security Controls” and “Office Security Best Practices.” Thank you, Mike!

Banks’ use of external data storage and third-party technology makes them especially attractive to hackers, warned Korbinian Ibel, director general of microprudential supervision at the European Central Bank, who called for “a common understanding at board level of the needs and risks of IT”. His warning comes after a malware attack on the ECB’s own Banks’ Integrated Reporting Dictionary website caused its closure last week.

Thank you to Rob H. for passing along an article from the Wall Street Journal: “The Startups Safeguarding Real Estate Against Schemers and Scammers.” The story mentions that wire-transfer fraud cost 11,300 victims nearly $150 million last year, according to the FBI.

Evaluating borrower risk

Regarding the current, and future direction, of underwriting, an industry vet from the East wrote, “Historically as incomes have risen, the debt to income (DTI) ratio has been modified higher because the disposable income becomes greater as an individual’s monthly income rises. Unfortunately when the CFPB took over, its staff continually refused to listen to ‘bots on the street.’ The CFPB wizards never accounted for variations in disposable income. When a constructive individual looks at the disposable income of an individual earning $60,000 it is noted that they have a radical difference from the disposable income of an individual earning $400,000 a year. There was an educational ignorance at the CFPB in that staff continually refused to listen to input from industry and only adhered to the input from the consumer groups. Unfortunately, ‘safety and soundness’, though noble in its concept, has had a negative impact on the lower economic groups it was designed to protect holding them back financially and preventing economic disparity while preventing this sector of America from prospering with the upper reaches of our society.”

State law changes

The state of Nebraska enacted provisions relating to its Online Notary Public Act. Provisions include remote presentation and the requirements needed to register as an online notary public and educational requirement mentioned above, a notary public must take a course of instruction and pass an examination approved by the Secretary of State. The fee for registering or renewing a registration as an online notary public will be an addition to the fee required in section 33-102 of the Act.

The amendment requires a notary public to register with the Secretary of State which includes information regarding the technology the notary public intends to use to perform an online notarial act, a certification by the notary that he or she will comply with the standards developed by the Secretary of State under section 7 of the act; and an email address for the notary. Additionally, the amendment allows the online notary public to perform acknowledgments, jurats, verifications or proofs, and oaths or affirmations as online notarial acts.

The Ohio Mortgage Bankers Association posted the following information: Both houses of Congress have passed H.R. 299; The Blue Water Navy Vietnam Veterans Act of 2019. Included in the bill is removal the maximum loan amount and down payment requirements for veterans with full entitlement and raises the VA funding fee for a period of 2 years.

Effective with closings on or after January 1, 2020, the funding fee for both active duty veterans and reservist first-time users with $0 down payment will be 2.30%, and 3.60% for subsequent uses. The funding fee will be 1.65% with a down payment of 5%, and 1.40% for loans with a down payment of 10%. Funding fees will reduce January 1, 2022.

The guaranty for loans at $144,000 and less remains unchanged. Loans greater than $144,000, to veterans with full entitlement, will be guaranteed at 25% of the loan amount, with no maximum loan amount. However, veterans that have used entitlement that has not been restored are limited to guaranty of 25% of the Freddie Mac conforming loan limit, less the amount of the previously used entitlement.

The state of Minnesota modified provisions relating to residential mortgage originators licensing requirements that include licensing exemptions effective on August 1, 2019.

The amendment exempts a manufactured home dealer or a manufactured home salesperson from the residential mortgage originator licensing requirements where the manufactured home dealer or a manufactured home salesperson: performs only clerical or support duties in connection with assisting a consumer in filling out a residential mortgage loan application but does not in any way offer or negotiate loan terms, or hold themselves out as a housing counselor; does not receive any direct or indirect compensation or gain from any individual or company for assisting consumers with a residential mortgage loan application, in excess of the customary salary or commission from the employer in connection with the sales transaction; and discloses to the borrower in writing.

In a recent legislative update from Black, Mann & Graham, L.L.P, the firm summarized bills from the 2019 Legislative Session that are effective immediately. Previous to this legislative update, it issued Legislative Update I, summarizing Senate Bill 2330 granting certain individuals temporary authority to act as residential mortgage loan originators in Texas, and Legislative Update II, summarizing Senate Bill 614 and House Bill 1442 that continue in existence the Finance Commission of Texas, the Department of Banking, the Savings and Mortgage Lending Department, and the Office of Consumer Credit Commissioner. Legislative Updates I and II are found on the Resources page of the firm’s website.

The Washington Department of Financial Institutions, Division of Consumer Services has issued a notice to licensees that it will temporarily waive certain fees and parts of fees under its Consumer Law Act.

For the period of July 1, 2019 through June 30, 2020, hourly fees charged on consumer loan company examination will be temporarily waived. Still required are the payment of travel expenses in connection with examinations. Also temporarily waived for the calendar year are Annual Assessments on the following categories of loans: 1) residential mortgage loans in portfolio on December 1, 2018; 2) residential mortgage loans brokered in 2019; and 3) residential mortgage loans purchased in 2019. Residential mortgage loans made during the 2019 calendar year will still be assessed. Mortgage Loan Originator Renewal Fees for the 2020 calendar years have been temporarily reduced from $155 to $75.

Connecticut has enacted provisions requiring real estate closings to be conducted by licensed attorneys. Under the new provision, no person shall conduct a real estate closing in Connecticut unless the person is a licensed attorney who has not been disqualified from the practice of law due to resignation, disbarment, or being placed on inactive status or suspension.

For purposes of this provision, “Real Estate Closing” means a closing for a mortgage loan transaction or any transaction where consideration is paid in exchange for ownership of real property. Not included in this definition are home equity lines of credit or any other loan transaction that does not involve the issuance of a lender’s or mortgagee’s policy of title insurance. These provisions are effective as of October 1, 2019.

I saw my wife, slightly drunk, yelling at the TV.

“’Don’t go in there! Don’t go in the church, you moron!”

She was watching our wedding video again.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Mortgage Rates: Thinking the Unthinkable.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)

Bronx property is first purchase in unique partnership designed to boost affordable housing

As part of an effort to increase the supply of affordable housing in New York City, the New York City Department of Housing Preservation and Development, Commissioner Louise Carroll, Settlement Housing Fund, the Community Preservation Corporation, and the New York City Acquisition Fund recently announced the first acquisition of a property through the city’s Neighborhood Pillars Downpayment Assistance Fund.

New home sales fell in July, but there’s a silver lining in the clouds

Sales of new homes fell in July, according to the Census Bureau and HUD. While July’s rate was 12.8% below June, it’s important to note that June’s figures were upwardly revised to a rate of 728,000 and remains 4.3% higher than a year earlier when it was 609,000. The correction of June’s figures is a substantial one. When the data initially came out last month, the report showed that new home sales increase 7% over May. Now, the new data shows that new home sales actually rose by more than 20% in May.

Aug. 23: Sales, LO jobs; CRA, DPA, pricing, recruiting products; vendor chatter

Japan’s government bonds could soon join Germany’s in having negative yields on all maturities. Japanese debt has gone negative out to 15 years, and buyers are turning to 30- and 40-year bonds to get positive yields. Falling bond yields and minimal interest rates are prompting European banks to consider the unprecedented step of offering home loans at negative interest, which would effectively pay customers for taking them while charging more on savings deposits. Denmark’s Jyske Bank is offering -0.5% 10-year loans, and others might follow. Fortunately the economy in the United States is stronger, and doing much better, than the economies in other countries. In this country, you know that if Reuters is writing about increased MSAs and joint ventures, and calling them “cozy,” that business model is back, and another periodical confusing non-QM with “liar loans” seems like sensationalism.

Jobs, business opportunities, promotions

A mid-sized, multi-channel independent mortgage banker licensed in 42 states is interested in speaking to mortgage bankers or brokers that are interested in selling their platform or merging into a company with a strong culture. The company has been in business for over 35 years and is a Fannie Mae, Freddie Mac and Ginnie Mae approved seller servicer as well as approved by all major private investors. Please submit inquiries to Anjelica Nixt for forwarding.

Award-winning Denver startup, Homebot, a financial dashboard to help homeowners build wealth with their home, is hiring! On the heels of winning the Grand Prize 2018

Realogy FWD Innovation Summit, the 2019 HousingWire Tech 100 Company, and recently named one of Denver’s Top 15 Denver Startups for Web and Innovation, Homebot is poised for phenomenal growth in the coming year. There are a number of open positions that the company is seeking to fill in Denver and one remote opportunity for a Business Development Manager in Texas. Check out its open positions at homebot.breezy.hr. Homebot is seeking experienced candidates in lending and real estate. Please share these opportunities with your networks and help us find the best candidates to bring on to their rock star team!

GO Mortgage, a DBA of GSF Mortgage Corporation, is pleased to announce Courtney Hill as its new Builder Relations Manager in the Construction Lending Division. Courtney will be working with our builder partners and manufactured dealers to ensure they experience an efficient and smooth loan process. Courtney will also be responsible for creating and distributing product information to partners and loan officers. She joins GO Mortgage with extensive onsite construction management and mortgage experience. The GO Mortgage Construction Lending Division continues to expand with eligible builders, correspondents and retail originators across the country by offering the Singe Close product. If you are an originator with construction experience, please contact our VP of Retail, Frank Papaleo for information on the opportunity.

Mountain America CU is looking for a Mortgage Loan Officer with 3 to 5 years’ experience working in a financial institution to join the Post Falls, ID team! If you have a deep focus on Member Service and a drive for finding solutions to help members get into their first, last, or dream home, you may be a great fit. Mountain America has extensive mortgage offerings from portfolio, conventional, government, jumbo, construction and reverse loans to fit member’s needs. We are an established business with over 2000 employees, competitive pay, benefits, and many other employee perks.

Mid America Mortgage, Inc. announced the promotion Michael Cooksey to Executive Managing Director of Production where he will be overseeing and ensuring the success of Mid America’s current network of retail branches nationwide, as well as recruiting and on-boarding new branches.

Lender products & services

Today, the average age of Loan Originators is between 46 and 47, which is about four years older than the US workforce overall. More importantly, opportunities for Loan Officers are expected to grow at about 11 percent between now and 2026 – more than 50 percent faster than the growth for all occupations. So it should come as no surprise that Fannie Mae’s Q2 2019 Mortgage Lender Sentiment Survey shows that, after improving consumer-facing technology and streamlining business processes, improving talent management and leadership is the top concern for mortgage lenders. It’s time for mortgage lenders to get serious about recruiting and training the next generation of Loan Originators and Loan Advisors. Cloudvirga’s Chief Product Officer Tim Von Kaenel outlines three strategies for attracting, recruiting, and retaining top-performing Loan Officers as millennials move into mortgage.

The recent drop in mortgage rates has rendered 8.2 million mortgages refi-eligible, and a further 1/8 percent decline in rates would thrust the number of refi-eligible borrowers to 9.7 million. That’s a lot of customers you could be wowing with automated asset, income and employment verification. FormFree’s Passport is the O.G. provider in this space, but FormFree has done something decidedly new-school with its recent decision to offer closed loan pricing, where lenders only pay for a full report on loans that fund. See a live demo of Passport at Freddie Mac Connect, where FormFree is holding down booth #15 as the event’s platinum sponsor.

Support for/against HUD Mortgagee Letter 2019-06 (7th in series on DPA). “At CBC Mortgage Agency, we watched reaction to HUD’s new rules with interest, and dismay. Eight states came out in favor of the proposed policy, choosing to stifle consumer choice rather than face competition. The losers? Americans needing help moving up the housing ladder. We joined NCSHA in an effort to collaborate with state HFAs to establish markets for DPA paper through efforts like the CRA Note Exchange. But some states prefer regulatory monopolies. They’ve even sued organizations seeking to provide DPA in their domains. The Chenoa Fund offers one set of guidelines and funding processes nationwide. Multiple internal pricing surveys show our pricing to consumers is better by one-eighth percent, and our process is simpler for lenders. Several states have improved pricing to compete with the Chenoa Fund program. Bravo. That’s vivid evidence that marketplace competition is benefiting consumers.”

Calling all mortgage leaders. Does your CRM stink? Most Customer Relationship Management systems make some fatal errors. Here’s one high-level mistake baked into the term CRM. The C stands for customer, obviously. But what defines a customer? The borrower, right? Wrong. It’s the borrower, AND it’s the Loan Officer. LOs are your internal customer and if your system misinterprets their needs, they won’t engage. If your system is complicated it will confuse them, and if you confuse you lose. Another error baked into CRM’s is the term Management. Today customers (external and often internal!) refuse to be managed. Today’s customers make their own decisions, and they hate being sold to. The answer? Redefine customer as Relationship. Engage, don’t manage. Simplify, don’t complicate. Then you’ll have a Relationship Engagement Platform. And it won’t suck. Dan Harrington, CEO Usherpa, Mortgage CRM since 1995.

Vendor & coop tidbits

The Mortgage Collaborative announced the addition of Kate deKay (CEO, Eustis Mortgage) and Allison Johnston (COO, Success Mortgage Partners) to its board of directors. Johnston and deKay were voted in at TMC’s most recent summer conference in Nashville. The conference featured record attendance at the highest “LTV” (lender to vendor) ratio of any mortgage industry conference this year. (Next year’s will be held at The Roosevelt New Orleans, February 16-18, 2020.) “TMC’s conferences provide lender members a unique opportunity to participate in compelling and interactive sessions led by their peers focused on growth initiatives, business best practices and experiences with third party providers.” (Click here for more info and early bird registration or give COO Rich Swerbinsky a shout.)

Vendors don’t only cater to lenders. On the real estate buying and selling side of things, Homebot, a customer engagement platform that delivers financial scenarios to help homeowners build wealth, has announced major enhancements to the homebuying side of its platform. The latest release inserts lenders into the market search process by integrating prompts for buyers to obtain a prequal or preapproval, lock a rate, and inquire about down payment with a single click. And, to instill a sense of urgency, future buyers can see how their buying power has changed over time as well as which markets best match their lifestyle, price point, and buying timeline. Read the Homebot for Buyers blog. To sign up for Homebot, visit homebot.ai or, see what your own home is worth by clicking here.

Guild Mortgage announced an alliance with Homebot to enable Guild’s loan officers to provide regular, customized home finance and wealth building intelligence to homeowners. “Guild’s loan officers can now offer customers relevant data, economic insights and market intelligence and stay connected with homeowners in a meaningful, personalized way long after the mortgage transaction has closed.” Refinancing opportunities, purchasing power for buying a new home or trading up to a new home, cash flow and short-term rental opportunities. Guild Mortgage will provide the company’s more than 1,100 loan officers nationwide access to Homebot’s “Lender Base” service at no cost to them.

Blend announced the release of a new product for lenders: self-serve pre-approvals. “As more consumers begin their mortgage process online, Blend has built a more seamless way for them to start their home buying process with automated, self-serve pre-approvals. For lenders with consumer direct channels, the new feature helps them prove their value to prospective borrowers without the intervention of a loan officer. On the flip side, these pre-approval letters enable borrowers to understand quickly exactly how much they can borrow, helping them compete in a tightening real-estate market.”

Total Expert’s Marketing Operating System is now powering Motto Franchising, LLC’s MottoSpark, a marketing and sales customer relationship management platform available to Motto Mortgage franchises across the country. Motto Mortgage’s 100+ franchise locations (in more than 30 states) will use Total Expert to drive sales and marketing efforts for mortgage loan officers. Motto Mortgage loan officers will use Total Expert to combine their client knowledge with publicly available data to build automated, hyper-personalized marketing campaigns. 3.) Motto Franchising is part of the RE/MAX Holdings, Inc. family of brands.

Capital markets

Recall that headline U.S. GDP growth declined from 3.1 percent to a 2.1 percent annualized pace in the second quarter according to the “advance” estimate released by the Bureau of Economic Analysis. Still nowhere near negative for two quarters, the technical definition of a recession. The number was buoyed by a 4.3 percent increase in personal consumption as net exports and business investment were weak due to ongoing trade uncertainties. Non-defense federal spending swelled 15.9 percent and a deal was just announced to increase caps on discretionary budget amounts and suspend the debt ceiling for two years. At least we’ll avoid potential shutdown drama for a while. Elsewhere, residential spending continued its decline; now down for six consecutive quarters. Existing home sales were down 1.7 percent in June as low inventories in affordable areas continue to weigh on the market. Even with mortgage rates hovering around 3.75 percent for 30-year fixed aren’t enough to significantly move the needle on sales. Additionally, the trade war has seen the dollar value of foreign purchases decline 36 percent over the last year.

U.S. Treasuries sold off again yesterday, including the 10-year closing +3 bps to 1.61 percent (though it still sits 19 bps below the 2-year in this inverted yield curve environment) on the back of mostly better than expected PMI readings from large economies in Asia and Europe. Additionally, the ECB minutes were deemed less dovish than hoped. Eurozone’s August flash Manufacturing PMI and flash Services PMI both beat expectations, as did Germany’s. Domestic news wasn’t as cheery, with U.S. flash Manufacturing PMI for August posting the first contractionary reading in ten years. And Freddie Mac revealed mortgage rates have now hit a year-to-date low. Time to push those refinances! Finally, markets were thrown a curveball when three Federal Reserve policy makers said they don’t think the U.S. economy needs lower interest rates, pushing back against a White House scrambling for ways to stave off a recession many see coming. Whether this growing sense of caution presages a smaller cut, or none at all, is a question that won’t be answered until next month.

Markets now turn their attention to Fed Chair Powell, who will speak in Jackson Hole this morning. Officials from the Federal Reserve and other central banks have gathered for the annual symposium on monetary policy, with this year’s theme being “Challenges for Monetary Policy.” (Guess my invitation was lost in the mail.) On the other side of the Atlantic, we have holders of the fiscal levers gathering at the G-7 in France. Both conferences are seemingly looking to the other to solve the world’s problems. Today includes just two domestic releases of note to close the week, with revised building permits for July, and July New Home Sales both due out later this morning. Friday starts with agency MBS prices better by a few ticks and the 10-year yielding 1.61 percent.

(Thank you to Doug B. for these grammar bar jokes, part 5 of 5.)

A simile walks into a bar, as parched as a desert.

A gerund and an infinitive walk into a bar, drinking to forget.

A hyphenated word and a non-hyphenated word walk into a bar and the bartender nearly chokes on the irony.

An allusion walks into a bar, despite the fact that alcohol is its Achilles heel.

The subjunctive would have walked into a bar, had it only known.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Mortgage Rates: Thinking the Unthinkable.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.

Rob

(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)