LenderNews by Rob Chrisman
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June 17: Blockchain news & a symposium; appraisal changes in the offing? Beefing up your interview process

June 17, 2017

I have been in Austin, Texas for a few days, coincidentally the home of Whole Foods. Plenty of folks here are debating its purchase by Amazon for $13.4 billion. (Compare that to Nationstar’s & Flagstar’s market cap of $1.8 billion, SunTrust’s $27 billion, or Wells Fargo’s $266 billion). Nope, M&A isn’t confined to the financial services sector.
 
Scene: Amazon’s Jeff Bezos’ trendy home earlier this week. He’s talking to his Echo.
Bezos: “Find me something to buy at Whole Foods.”
Echo: “Okay, buying Whole Foods.”
Bezos: “Oops.”
 
Blockchain updates
 
Technology also seems to be the name of the game. Thomson Reuters has made its smart oracle BlockOne IQ available for testing in the blockchain ecosystem. The oracle is a type of adapter that allows Reuters data to be integrated into blockchain-based applications.
 
On June 13, the Financial Industry Regulatory Authority (FINRA) announced a new outreach initiative to improve its understanding of fintech innovations and how they impact the securities industry. The Innovation Outreach Initiative will consist of the following components: the launch of FINRA’s new webpage dedicated to fintech topics such as RegTech (covering compliance monitoring, fraud prevention, data management, and the identification and interpretation of regulations affecting the securities industry), artificial intelligence, and social media sentiment investing; and the creation of a cross-departmental team led by the Office of Emerging Regulatory Issues developed to, among other things, foster discussion on fintech developments, develop publications on fintech topics, and increase collaboration with domestic and international regulators.
 
Additionally, FINRA announced it will host a Blockchain Symposium in New York City on July 13 to create an opportunity for regulators and industry leaders to discuss opportunities and challenges related to the use of Distributed Ledger Technology, also known as blockchain.
 
Law firm Buckley Sander wrote that, “On June 8, Vermont Governor Phil Scott signed into law legislation (S. 135), which would, among other things, allow for broader business and legal application of blockchain technology to promote economic development. Additionally, S. 135 requires the Center for Legal Innovation at Vermont Law School, the Commissioner of Financial Regulation, the Secretary of Commerce and Community Development, and the Vermont Attorney General to prepare a joint report for the General Assembly on ‘findings and recommendations,’ as well as policy proposals and ‘measurable goals and outcomes’ concerning ‘potential opportunities and risks presented by developments in financial technology.’
 
“The new law follows the passage of House Bill 868 last June, which defined blockchain as “a mathematically secured, chronological, and decentralized consensus ledger or database,” and formally recognized blockchain-notarized documents as having legal bearing in a court of law.
 
Arizona recently enacted a similar law (AZ H.B. 2417) recognizing blockchain signatures and smart contracts under state law.
Appraisal system change
 
It is hard to find a residential lender that believes the current appraisal system, and appraiser system training system, is wonderful. Will there be enough appraisers in the housing industry’s future? Is the current environment forcing investors to create work-around solutions to obtaining an actual appraisal?
 
Even those within the appraisal industry are lending valuable insights into “how the sausage is made” and how to make it better. Bill Fall, founder and president of Valuation Partners, writes, “There has clearly been a lot of interest and concern around the future of appraisal profession considering the aging workforce and limited numbers entering the field. Fortunately, several recent events have addressed the issues and progress is beginning to occur. I participated on the Appraisal Qualification Board task force in December to address the challenges of attracting new appraisers imposed by the current criteria. Everyone recognized the problem and clearly no one wanted to compromise on the meaningful progress aimed at producing better qualified appraisers. 
 
“But the current requirements are challenging to say the least – a residential trainee must gain a 4-year college degree plus 200 specialized classroom educational hours plus 2000 field experience hours in no less than 2 years. Needing a supervisory appraiser to guide them along the way often on every inspection. And a full day exam to pass before becoming a certified appraiser. A high bar to cross compared to similar professions.
 
“As one of the outcomes from the meeting, the AQB recently released an alternative path to gaining fundamental experience and held material discussion with many stakeholders at their meeting this week in Tampa. Huge progress here Rob. Realistic measures that are competency based – not just hours in the field. The new model will continue to allow for the supervised method currently deployed but offer modules tuned in to real world simulative experience. This is similar to Capstone type coursework such as used by the Appraisal Institute for the MAI designation. 
 
“The educational world is evolving quickly and there are broader and more meaningful on-line options than existed when current experience requirements were crafted in the late 80’s. The new module approach will facilitate good training and create high quality professionals. Candidates will be charged with progressing on their own according to their level of ability – not at the discretion of a supervisor. The new option is scheduled for implementation in July 2018. The sooner the better in my view.
 
Will there be enough appraisers in the housing industry’s future? Until recently, Bill Fall, founder and president of nationwide appraisal management company Valuation Partners, had his doubts. But the AQB’s recently announced new appraiser training requirements that may be just what the industry needs. 
 
“The AQB’s new criteria released last month is a huge improvement. It’s based more on an appraiser candidate’s competency, not an arbitrary number of hours, so it’s more realistic. It also blends the current method of supervised training with classroom modules that simulates real world situations, like the Capstone-type coursework that the Appraisal Institute currently uses for MAI courses. The best part is that potential appraisers will have more control over their careers and can move forward based on their ability. It’s a true turning point that will ultimately create higher quality professionals.” Thanks Bill!
 
How to interview
 
Shifting our collective gaze to personnel, corporate culture, and hiring, Steve Brown with PCBB penned a piece on interviewing and the job seeking process. “Kissmetrics finds there are four key elements that lead to a good company culture. The elements are: hiring people who fit your culture, make sure employees know the values and mission of the company, understand that good decisions can come from anywhere in the company, and realize the company is really a team and not a bunch of individuals.
 
“As you think about your own company’s culture, we broaden our discussion to focus in on the way some top companies conduct job interviews. In recent years, companies like Google and Amazon have gained notoriety for their incredibly rigorous job interview processes. They are so good in fact, that competitors have begun to emulate the process in the hopes of selecting only the best and brightest talent. Although it is a decent jobs market and you may not want to limit your pool of candidates, research shows that harder job interviews also lead to more satisfied workers. That is good for employee longevity.
 
“Consider, for instance, a 2015 study by Glassdoor that correlates a 10% more difficult job interview process with 2.6% higher employee satisfaction later. Consider further that according to data from the Society for Human Resource Management, the average cost to source a new employee is $4,129. That is just the cost to hire and does not incorporate replacement costs, so you will want to be sure you are spending money wisely to get the right people that will also stay longer.
 
“In a follow-up analysis released earlier this year, Glassdoor identified several distinguishing features of challenging interviews & questions. These findings may help community banks (and lenders) hone screening processes and ultimately hire employees who are more qualified and dedicated to the bank long-term. Research suggests that you should raise the bar when it comes to your screening processes. Not surprisingly, Glassdoor research noted that job interviews requiring layers of screenings are significantly more difficult for job seekers.
 
“Further, the type of interview makes a difference. Adding a group panel interview raises the difficulty rating of interviews by about 13%, while phone interviews upped the difficulty by 9%. If that isn’t enough, consider that skills tests made the interview process 8% more difficult and candidate presentations added 7% to the level of difficulty. By contrast, one-on-one interviews increased the interview process difficulty by 5%.
 
Those eager to make their interview process more challenging might start by adding a phone screening process, if one is not already in place. Phone screens can be a cost-effective way to weed out the first wave of applicants. On paper, a candidate may seem great, but after a few minutes on the phone it is often easy to identify those that won’t be a good match. For applicants who get past this initial screen, a group panel is a good next step. Candidates who meet with a variety of people come away with a better understanding of the bank’s culture, the work environment and job expectations. It’s also an opportunity for multiple people at the bank to form opinions that can be discussed, as you vet the candidate further. Indeed, more and more companies are making the interview process an all-day affair, where applicants are asked to meet with multiple employees and perform several skills-based tests throughout the day. This can be efficient for the bank & candidate.
 
“Depending on the role you are hiring for, you might want to ask candidates to prepare a short presentation. Be sure to give specific guidelines to the applicants so you don’t inadvertently set them up for failure. Certainly, making the interview process more rigorous can help provide your bank with high caliber personnel. Making your interviews too difficult, however, can inadvertently eliminate candidates who might be good employees. Community banks will need to find the proper balance between interviews that are too easy and those that are too difficult for the overall health of your workforce and your bank.”
 
 
(Thank you to Jan M. for this one.)
Before the Shabbat service, Maurice goes to his friend Irving and says, "I need a favor. I’m sleeping with the Rabbi’s wife. Can you hold him in synagogue for an hour after services for me?" 
Irving is not very fond of the idea but being Morris’ lifelong friend, he reluctantly agrees.
After services, he strikes up a conversation with the Rabbi, asking him all sorts of stupid questions, just to keep him occupied. 
After some time, the wise Rabbi becomes suspicious and asks, "Irving what are you really up to?"
Irving, filled with feelings of guilt and remorse confesses to the Rabbi, “I’m sorry, Rabbi. My friend is sleeping with your wife, right now so he asked me to keep you occupied." 
The Rabbi smiles, puts a brotherly hand on Irving’s shoulder and says, "You better hurry home, Irving. My wife died two years ago!"
 
 
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, “Does Everyone Want a Job?” 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 2017 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.)