LenderNews by Rob Chrisman
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Sep. 8: Reader’s notes on being an LO, Realtors, the importance of compliance, cyber insurance, and ownership

September 8, 2018

Está sucediendo mucho en San Diego para los prestamistas. Este fin de semana, y durante cuatro días, la Convención Nacional de NAHREP está atrayendo a 10.000 profesionales de bienes raíces, expertos en la industria y ejecutivos corporativos de alta producción. Y este próximo jueves y viernes, American Pacific tendrá su simposio de otoño de 2018: El poder de ti. El simposio se celebrará en San Diego del 13 al 14 de septiembre y está diseñado específicamente para que los originadores de hipotecas y los gerentes de sucursales interactúen y colaboren con líderes, productores principales y otros líderes de la industria. Por ejemplo, el viernes por la tarde entrevistaré al famoso líder de la industria, Angelo Mozilo. Haga clic aquí para registrarse o comuníquese con Dustin Block (303.378.3166) si tiene preguntas ".
 
Yes, I speak some Spanish, but not that well… There’s a lot going on for lenders in San Diego. This weekend, and for four days, NAHREP’s National Convention is attracting 10,000 top producing real estate professionals, industry experts and corporate executives. And this upcoming Thursday and Friday American Pacific is having its 2018 Fall Symposium: The Power of YouThe Symposium will be held in San Diego on September 13-14 and is crafted specifically for mortgage originators and branch managers to interact and collaborate with leadership, top producers and other industry leaders. For example, on Friday afternoon I will be interviewing renowned industry leader, Angelo Mozilo. Click here to register or contact Dustin Block (303.378.3166) with questions.”
 
Although rates moved up yesterday, the direction of rates has not been a primary conversation topic for quite some time. Instead, many in the industry are focused on products, programs, and technology that will help their borrowers, protecting themselves and their borrowers from losses due to IT issues, along with the regulatory burden felt by many. Let’s see what is on people’s minds.
 
Homeownership and affordable housing
 
I wrote a primer on affordable housing for the STRATMOR Group titled “What Does Affordable Housing Mean?
 
Marcia Griffin, President of HomeFree-USA, writes, “The home mortgage industry across the U. S., now on ‘sound footing’ since the crisis of 2007, is still leaving prospective homeowners behind, according to a recent Harvard University study. Chris Herbert, managing director of the Harvard Joint Center for Housing Studies in the center’s annual State of the Nation’s Housing report, writes, ‘But a number of challenges highlighted in the first ‘State of the Nation’s Housing’ report 30 years ago persist today, and in many respects the situation has worsened for both the lowest-income Americans and those higher up the income ladder.’
 
“This dearth in homeownership is the reason that an upcoming annual conference is crucial. The 14th Annual HomeFree-USA Reaching Millions conference is set for Sept. 17-19 in Washington, D.C. The educational and leadership development conference will feature nationally renowned speakers like Stedman Graham, Quicken Loans’ CIO, Linglong He, mortgage banking CEOs and sales leaders. The unique aspect of the conference will be a mixture of education and inspiration with a goal of establishing a synergy for partnerships. We’re looking to help increase homeownership and financial success among low-to-moderate income people, elevate the stature and increase the impact of government, nonprofit and for-profit housing and homeownership providers, and create and strengthen public/private partnerships.
 
“Your readers should know that a look at the Census Bureau breakdown of the homeownership rate by race shows communities of color still lagging far behind White homeowners, despite historic efforts to close the gap, including the Fair Housing Act of 1968. According to the Census Bureau, the following are the current stats broken down by race: Non-Hispanic White householders was highest at 72.9 percent, Asian, Native Hawaiian and Pacific Islander householders was second at 58.0 percent, Hispanic householders was at 46.2, and Black householders was lowest at 41.6 percent. For more information about the conference contact Milan Griffin.
 
Cyber on
 
Chicago’s tech experts answer three critical cybersecurity questions: a group of security-minded executives in Chicago, long a hub for legal and financial tech, sat down for a panel discussion on anticipating and combatting cybercrime.
 
Tom Delaney, President of Bankers Insurance Service, sent, “Since 1952 when Bankers Insurance Service (BIS) developed the Mortgage Bankers Bond program in conjunction with the Mortgage Bankers Association (MBA), BIS has offered the mortgage banking industry cutting edge insurance programs that respond to the ever-changing risk environment.  In 2012, BIS recognized that the mortgage lending process was moving toward a digital experience, at the exact same time that cybercrime was becoming the crime of the day. In response to this confluence of events, BIS developed a Cyber Liability insurance program offered specifically to mortgage bankers.  This program includes data breach response and notification services, third-party liability insurance, and a host of other robust coverage features that protect mortgage lenders from emerging cyber exposures. For more information regarding BIS’ Cyber Liability insurance program, please visit the BIS website or contact BIS’ President, Tom Delaney.”
 
Shifts in products, production, and underwriting policies
 
Tom Trahan observed, “Although the proliferation of Non-QM production scares me, there is some data that might support the ‘CFPB has gone too far’ theory. I dug into some recent tables showing the performance of Fannie Mae loans, and the difference in performance based on the era the loan was originated in: 2004 and prior, 2005-2008, and 2009-2018. Regarding delinquencies, maybe the underwriting standards 2005-2008 were too lax and warranted some changes? But the 2009-2018 numbers tend to suggest a ‘race to ZERO’ that is turning down some good loans. Maybe the underwriting standards in place prior to 2004 would produce a more realistic level of scrutiny with an acceptable level of delinquency?” [Editor’s note: many agree with this sentiment, whether it is in underwriting guidelines or enforcing the rules and regulations in place at that time.]
 
Looking at the general compliance environment, a while back I received this note from Stephanie Diana Gast-Wilson. “I specialize in condo compliance and have a masters in operations management while I work on my Doctoral program in business administration. This gives me an interesting view on how compliance is seen in our industry. And I have noticed a systematic issue where, especially with the growing number of non-bank lenders, management at many of the leadership members have only a sales background. This brings with it the attitude sales people have for compliance. Which has led to interesting arguments with my brother, who is a loan officer.  
 
“In one of these rumbles he stated, ‘All compliance people are alike. And you don’t realize that you are in the way of progress.’ I’ve noticed this attitude when having to explain why a condo is not approvable. Sales often views compliance as an enemy with whom they must do battle. This is funny to me because compliance specialists throughout the industry are a sales person’s best defensive weapon. Compliance is meant and further designed by the CFPB to be a sales person’s weapon to protect themselves and the borrower from fraud or all in all making a bad investment. We also protect the company we work for which helps keep and grow sales jobs. Compliance and regulations aren’t the enemy here. They are the weapon we are just learning to use and now the blade is being dulled leaving us all vulnerable.”
 
From Utah Ty Burbidge scribed, “Saturday’s commentary brings several thoughts to my mind concerning the differences between Realtors and loan officers. Discussing the fact that being dual licensed is difficult, if not impossible, and I feel that I have been seeing a lot of LOs leaving to be realtors. The perspective (and perhaps the truth) is that realtors have less difficult jobs, don’t have to deal with underwriting issues, don’t have to talk clients through down payment difficulties etc. The list is long. On top of all that realtors make much more money per transaction than an LO does. Which brings up the next point of LO comp.
 
“It was mentioned that the current distribution is unsustainable. It seems to me though that if we don’t continue to raise the commissions for LOs, we may go back to the old days of all being realtors and realtors obtaining a mortgage for the client.
 
Lastly, realtors don’t seem to have near the responsibility of compliance that LOs do. Which adds to the problem. Any program that has questions about its legitimacy can cause a LO to lose realtor referral partners. Realtors, unfortunately, don’t have the regulations on them and they see various programs, which we may or may not offer, as easy ways to get a client into a home. So, the realtors, who clients trust to direct them, are directing them to these companies who are not following the rules. If those companies go down, the realtor most likely just finds the next one. Realtors should share the same regulations, responsibility, and risk that a lender does in protecting the client.”
 
Bob Wihlidal, a California loan officer who telecommutes from Magog, QC, Canada, writes, “Here are my 2 cents and why I’m still in business at age 73. Personally, with my tenure, I doubt Zillow is going to be able to take any of my peeps. Any time I know anyone who will be selling their home, I advise them to be very careful about going with a cut rate low commission company. If you sign up for anything less than a 6.00% commission to be split with both the buyer’s broker & the seller’s, make sure the buyer’s agent gets at least 3.00%. Like everything we purchase, we usually get what we pay for. In almost every purchase, the negotiating for both parties can go up or down tens of thousands of dollars all the time. If any buyers or sellers are within $25-$50K or so, and the Realtors let it fall apart, someone didn’t do a very good job. 
 
“I counsel my pipeline all the time about collecting interest instead of paying it and making the banks rich. I can personally get just about anyone’s scores in the upper 700s in 30 – 60 + days if they just pay attention and do what it takes to beat the computer programs.
 
“I still think that World Savings was the best run bank in the U.S. history. In my opinion there have never been one of their option arms recast because it (loan amount vs. appraised value) was 125%, unlike WAMU, Countrywide, etc. that had 5 years or 110-125% LTV. World sold to Wachovia and Wachovia sold to Wells, who really ripped off those borrowers by selling them into a fixed rate loan. Some of my peeps were moved into a fixed in the 6’s or 7% range.  If they had just kept their Option Arm, it would have been closer to 3.00% for years now, and even today, probably not a bad of a loan if not paid in full. (Editor’s note: To the best of my knowledge, none of the borrowers were forced to take that option, and one could assume that these borrowers, if they didn’t deem it of benefit, could have walked away and kept their option ARM. And 6% may have been the correct interest rate from a risk perspective at that time given income or LTV. World was incredibly thorough with its appraisals, and tight on LTVs.)
 
“In my opinion, both the West & East Coasts are due for a correction because values have gone up too quickly. If that happens, guess who is going to throw up their hands and say, ‘*&^% you’?  The FHA loans have always been the original subprime loans and why would the Feds let anyone that has a 580 score purchase a home? I think it isn’t brain surgery to maintain at least a 680 – 700 + middle score. It’s Congress that said that everyone should be a homeowner, and too many in the U.S. don’t even make good tenants, much less homeowners. I’m still blown away that, to the best of my knowledge, nobody ever went to jail for all of the fraud that happened to cause 2008.” Thank you, Bob.
 
 
(I know, a repeat. But a fine joke.)
An Irishman walks into a bar in Dublin, orders three pints of Guinness and sits in the back of the room, drinking a sip out of each one in turn.
When he finishes them, he comes back to the bar and orders three more.
The bartender approaches and tells him, "You know, a pint goes flat after I draw it, and it would taste better if you bought one at a time."
The Irishman replies, Well, you see, I have two brothers.
One is in America, the other is in Australia, and I’m in Dublin.
When we all left home, we promised that we’d drink this way to remember the days we drank together.
So I drink one for each o’me brothers and one for me self."
The bartender admits that this is a nice custom, and leaves it there.
The Irishman becomes a regular in the bar, and always drinks the same way: He orders three pints and drinks them in turn.
One day, he comes in and orders two pints.
All the other regulars take notice and fall silent. When he comes back to the bar for the second round, the bartender says, "I don’t want to intrude on your grief, but I wanted to offer my condolences on your loss." The Irishman looks quite puzzled for a moment, then a light dawns and he laughs.
"Oh, no, everybody’s just fine," he explains, "It’s just that me wife had us join that Baptist Church and I had to quit drinking.
But it hasn’t affected me brothers though."
 
 
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, “What Does Affordable Housing Mean? 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 2018 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.)