LenderNews by Rob Chrisman
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Dec. 10: Notes on political appointees impact on lending, appraisals, cybersecurity, Ginnie, improving your business

December 10, 2016

We should all aspire to something…like being a father at age 73? Congrats, I guess, to Mick Jagger who is the father to his girlfriend’s child. Mick also happens to be a great-grandfather. Put another way, he now has a child younger than his great granddaughter. Modern medicine…
 
On to things more relevant, like Rick Huard, SVP, Home Equity Product Manager at TD Bank weighing in on home equity, and the topic of today’s joke. "It’s encouraging to see the number of homeowners, especially Boomers, with positive equity gains. As Boomers continue to retire over the next couple of years, a residence will make up a great deal of their investment portfolio. A home equity line of credit (HELOC) can be an attractive way for Boomers to pay for unexpected expenses during retirement. HELOCs give consumers the flexibility to borrow needed funds over time, and then offer an interest-only repayment option throughout the draw period which is typically 10 years."
 
How about actually listening to your clients to improve your business. My guess is that vendors or LOs don’t want to ask, “How could I improve things?” From Lionel Urban, CEO of mortgage technology provider PCLender: “I truly believe those in the mortgage business could take a cue from some of the world’s largest, most innovative companies. Companies like Amazon and Microsoft, for example, have changed the world and have inspired others in all types of businesses. These companies can teach us in the mortgage industry some lessons. How so? 
 
“Both companies have done a tremendous job of exploring their customers as a source of competency to improve their products and services. Since 1994 when Jeff Bezos founded Amazon, the company has refined their feedback process and has over 54 million US members spending over $1,000 per year. The mortgage industry should pay attention:  the best ideas often come from a company’s users and customers.”  Read more on what Lionel has to say on this topic here.
 
Of course, one way to improve customer service is to leverage technology, which usually means computer software, which in turn has its own set of problems. Pete Mills, the MBA’s SVP of Residential Policy and Member Services, contributed, “Rob – your recent coverage of cybersecurity risks, and the NY Department of Financial Services Cybersecurity regs in particular, was an important reminder of the challenges the industry faces today in taking care of customer data. That said, your coverage also highlighted the risks of having multiple cyber standards arising from various regulators and counterparties. While NY DFS’s rules show leadership among the state regulators, they also underscore the need for coordinated efforts across federal and state agencies. In response to the NY rules, a large industry coalition has raised serious concerns with New York’s direction, outlined in a detailed comment letter last month.
 
“The broad coalition of financial trades strongly urged the Department of Financial Services that any final rule be complementary and consistent with existing cyber security requirements and embody a risk-based approach. More specifically, the letter recommended that the final rule conform to the National Institute of Standards and Technology Cybersecurity Framework, which has served as a model of collaboration between government and industry in developing a comprehensive risk-based cyber security framework widely used across financial firms and more broadly across other critical sectors. Additionally, the letter suggested other points of consideration for DFS, including the need for a much longer implementation period than the January 2017 effective date in the proposal. The letter further noted that cyber security regulations issued by only one state—without an effort to converge and coordinate with existing cyber security requirements—will lead to confusion, additional costs, and a misalignment of cyber security operations within the industry.  Bottom line is that cybersecurity won’t be improved, and consumer will not be well-served, if each state and federal agency has different standards.” Thank you, Pete!
 
An anonymous reader sends, “Are lenders and real estate companies subject to the inability to change regarding technology? I wonder if the National Association of Realtors (NAR) may be suffering from that. In that context, I found it interesting to ask, ’What’s the future of Zillow?’ Technology and consumer expectations seem to be threats to realtors, generally, and I’m curious if NAR has spent so much time protecting its current turf and avoiding legislation like Dodd-Frank that the industry missed the memo on mobile/digital.”
 
Former Ginnie Mae President Joe Murin has been making his presence felt in the press lately. What’s on his mind? Giving Ginnie what it needs to do its job. He writes, “An independent auditor’s report recently observed that Ginnie is woefully underfunded and understaffed. This at a time when its portfolio is leaning increasingly toward non-bank lenders. That, in and of itself, isn’t a bad thing—but it needs to be monitored and managed. Ginnie doesn’t have the firepower to do it.
 
“It’s way past time to move Ginnie out from under HUD and get it the help it needs. There’s only one entity truly making housing affordable for veterans and first time homebuyers, and we’re forcing it to fight with one hand tied behind its back. All out of political gamesmanship. Where is the MBA?  NAHB? NAR? We all need to speak up about this issue. A collapse at Ginnie would be disastrous for our industry, removing badly needed liquidity and disabling one of our most important engines.”
 
Since it was officially announced by Trump’s transition team that Dr. Ben Carson will be nominated as the next secretary of HUD, recent comments were sent in by Dr. Rick Roque, president of Menlo, on how Dr. Carson and Steven Mnuchin might affect the market, especially rates. “I think President-elect Trump’s two cabinet appointments who have the most impact on housing and mortgages — Steven Mnuchin at Treasury and Dr. Ben Carson at HUD – may actually have the effect of lowering mortgage rates, or at least leveling them off. Here’s why. Mnuchin brings a lot of mortgage experience to the post, especially in subprime. He bought IndyMac when it was failing, turned it around, and sold it a big profit. He also understands the unique needs of non-depository lenders, since he ran one. I think he will favor an expansion of new loan products with a much deeper credit box that will enable more people to qualify for mortgages and buy homes. 
 
“That synchs up nicely with Dr. Carson’s priorities in expanding home ownership in inner cities. At the same time, privatizing Fannie and Freddie should provide those organizations with more capital, which will enable them to purchase more mortgages from lenders, many of whom are non-depositories. So that should have the effect of lowering interest rates, or at least keep them from going higher, and more volume should mean bigger profits for non-depositories.”
 
Before the election, The Collingwood Group Chairman Tim Rood wrote, “A draft of the Republican Party platform reportedly calls for dismantling Fannie Mae and Freddie Mac, while scaling back the government’s role in the housing market, and promoting stronger underwriting standards for home loans. The draft was seen by reporters for the Wall Street Journal, New York Times and others. The draft plan, which was revised before being adopted by the GOP platform committee, contains financial regulation planks that echo a sweeping legislation unveiled in June by GOP Sen. Jeb Hensarling of Texas.
 
"GSE reform is always popular for politicians during an election year because it is such a polarizing topic and it energizes each party’s base for opposite reasons. We can argue all day long about whether the country would be better off in the long term without Fannie Mae and Freddie Mac. We can all agree, however, that the short-term risks of such a plan are very real – higher rates, downward pressure on values, availability of credit to the underserved, etc. – and this ambiguity and anxiety continues to cripple some very thoughtful reform proposals."
 
On the recent appointees, Scott Olson, CHLA Executive Director, writes (in response to comments by Treasury-Designate Mnuchin that Fannie Mae and Freddie Mac should be returned to the private sector), "CHLA is encouraged by the comments made by Treasury-designate Mnuchin that the GSEs should be returned to the private sector – a step CHLA has long advocated. The details of how this is done matter, however. It is critical that we have a government guarantee on their MBS to avoid a jump in mortgage rates, and it is critical that explicit provisions be put in place to ensure equal and competitive access to community lenders, to avoid an origination market controlled by the large Wall Street banks to the detriment of consumers."
 
Appraisal turn times are already becoming less of an issue with the drop off in volume. But the appraisal business model and economics continue to be a topic of conversation. A while back Tulsa’s Tom Allen sent, “Rob, if appraisers were receiving $700 for each appraisal the problem of appraiser shortage would be resolved. I still receive, on a daily basis, an opportunity to appraise properties for $250-$300. Somebody is not telling the truth. I am involved with several organizations to include TAFAC and all I hear is talk. Talk is cheap.
 
I have been a residential appraiser since 1971 in Tulsa. I have always supported a 4-year degree. The old Society and Institute gave a 10-year warning in the 1970’s and then dropped the degree requirement after a couple of years. (Their numbers were down.) Then, TAF gave a multi-year warning for a 4-year degree and now everyone is trying to find a way out of that requirement. Pitiful. It all boils down to economics. Why would a college (old) grad like me be sitting at my desk on a Saturday completing appraisals? I even looked a property this morning. Young professionals are not looking to be workaholics.
 
“My CPA has an MBA in addition to being a CPA. I go to him because he is educated and NOT because he is cheap (he is not) and turn time is 48 hours (it is not). I go to him because he is educated and a professional. I pay him a handsome fee and, so far, have had no issues. And, that, my friend is the model that should have been adopted by appraisers years ago. Why would I want to enrich some of these bottom feeder AMCs? Most are bottom feeders and were bottom feeders before license law. Folks used to have 13 kids so labor would be cheap on the farm.
 
“My dream has always been to leave appraising better off than 1971. It is not going to happen. As my uncle used to write to me when I was in Vietnam in each letter, ‘Everything here is the same only different.’ Sad but true. Economics, economics, economics.”
 
Steve B. sends, “I find it comforting to know that the CFPB has taken the initiative to translate it’s TRID guidance and other interesting ‘brain droppings’ into so many other languages. I can’t help but wonder how they decided on these choices: CFPB in Chinese, CFPB in Vietnamese,  CFPB in Korean , CFPB in Tagalog, CFPB in Russian , CFPB in Arabic , CFPB in Haitian Creole. And of course, Spanish.  Interesting priorities.”
 
 
Senior Wedding
Jacob, age 92, and Rebecca, age 89, living in Miami, are all excited about their decision to get married. They go for a stroll to discuss the wedding, and on the way they pass a drugstore, Jacob suggests they go in.
Jacob addresses the man behind the counter: "Are you the owner?"
The pharmacist answers, "Yes."
Jacob: "We’re about to get married. Do you sell heart medication?"
Pharmacist: "Of course, we do."
Jacob: "How about medicine for circulation?"
Pharmacist: "All kinds."
Jacob: "Medicine for rheumatism?"
Pharmacist: "Definitely."
Jacob: "How about suppositories?"
Pharmacist: "You bet!"
Jacob: "Medicine for memory problems, arthritis and Alzheimer’s?"
Pharmacist: "Yes, a large variety – the ‘works’."
Jacob: "What about vitamins, sleeping pills, Grotto, antidotes for Parkinson’s disease?"
Pharmacist: "Absolutely."
Jacob: "Everything for heartburn and indigestion?"
Pharmacist: "We sure do."
Jacob: "You sell wheelchairs and walkers and canes?"
Pharmacist: "All speeds and sizes."
Jacob: "Adult diapers?"
Pharmacist: "Sure."
Jacob: "We’d like to use this store as our Bridal Registry."
 
 
If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Election Day 2016 is Over – Now What?” 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 over 300 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 2016 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.)