Aug. 29: Notes on public relations, TARP prison sentence, pros and cons of eSignings, and brokers & Reg. Z

Rob Chrisman

Rob Chrisman began his career in mortgage banking – primarily capital markets – 31 years ago in 1985 with First California Mortgage, assisting in Secondary Marketing until 1988, when he joined Tuttle & Co., a leading mortgage pipeline risk management firm. He was an account manager and partner at Tuttle & Co. until 1996, when he moved to Scotland with his family for 9 months. Read more...

No, it doesn’t make headlines when residential lenders help millions of borrowers, loans have been closed successfully, and borrowers are making their payments as they agreed to do. Regarding the CFPB seemingly targeting the entire residential lending industry and continuing to show negative borrower stories, Troy Cyrus with Emery Federal Credit Union writes, “There are other industries that impact the consumer who have earned a reputation for being less than honest, at least that is the perception.

 

“A more impactful response, in my humble opinion, would be for the MBA and it’s fragmented counterparts to begin posting videos, or include in ads, borrower success stories and place emphasis on how a broker or community bank assisted them into home ownership – there are countless struggles and stories that are played out daily of single mothers for example, building up their credit scores after little or no credit history catching a break and getting into their first home. Some hard working loan officers that have worked with these borrowers have held their hands for 24 months in some cases to restore or build good credit. Consider the time invested divided by the commission earned and it is immediately evident the return is FAR below minimum wage. It is the passion to serve that drives these ‘good eggs’.

 

“As an example I can personally recount in early 2000’s doing a rate/term refinance that placed a single dad (recently divorced) into a situation in which the court awarded him custody because he was able to keep his home with a separate bedroom for his son and daughter – a stipulation the court placed on him. Had this not occurred he was on track to lose his house and rent an apartment if faced with child support, alimony and the balance of his living expenses. At closing, this grown man was in tears while thanking me. The untold side of the story was the mother had an addiction problem the court failed to learn about. This would have been a worse situation for the children of course.

 

“I no longer originate, yet this story remains fresh in my mind and countless other MLOs likely have other evidences of success that would be a more positive counter to drown out the negative lens the mortgage lending industry is being viewed through based solely on a few bad actors.”

 

Anyone who has ever worked on a trading desk is never above sophomoric humor: a blow fly goes into a bar and asks, “Is that stool taken?” I don’t know if there’s much of that in a cellblock. Sophomoric humor that is. I did receive a question about jail time and TARP. “Has anyone gone to jail for anything related to TARP?” I am not going to do a lot of research on the topic, but the latest story of sentencing happened earlier this month.

 

Regarding changes in capital requirements, Ted Smith writes, “Your readers should be aware of the USA Today op-Ed on the recently approved bank capital requirements written by Digital Risk Chief Legal Officer Debbie Hoffman.” Thank you Ted.

 

Speaking of risk, Steve Brown, president and CEO of Pacific Coast Bankers Bank, writes, “Regulatory reports indicate examiners are looking closely at interest rate risk, as bankers have increased maturities in loans and securities over prior years. This duration extension could lead to increased unrealized losses (and negatively impact capital ratios) when rates rise. In addition, regulators are concerned about banker reliance on non-maturity deposits (vulnerable to shifting consumer behavior when rates climb). Finally, be aware regulators are looking more closely at variable rate loans that could be vulnerable to rising debt service burdens when interest rates increase, at the same time commercial real estate capitalization rates increase and property values could possibly decline.”

 

eClosing, eSignatures, eCommentaries – they’re in the news. Tim Anderson, Director of eServices for DocMagic, writes, “I attended the CFPB’s eClosing Forum where DocMagic was one of the pilot participants and Director Cordray stated that eClosing is one of the key initiatives he wants to see accomplished during his tenure.  If you look at the TRID requirements it also requires ‘Intent to Proceed’ at time of app, Receipt of Delivery three days prior to consumption, record retention of the CD for five years, not to mention the borrower ECOA appraisal delivery requirement to name a few. If people recall, in the initial discussions of the regulation there was also going to be a requirement to produce the new disclosures in a ‘machine readable format.’ The only reason this did not happen was that the MISMO 3.3 data spec was not out yet and FHFA is coming out with their version called the Universal Closing Dataset, (UCD). All for the benefit to electronically board and auto validate, (audit) the data file for compliance and not the paper file.  Implementing a full eSign process solves all these problems. I find it almost unbelievable that still with all of this, how many are still clinging to an antiquated paper process and are now saying they are going to tack on an additional ten days to the closing date to accommodate the mail box and read rule rather than implement an electronic eSign, eConsent process that ensures a three day close.

 

“And let’s not forget the consumer in all of this. We have found that if offered the ability to eSign (eDisclose) documents at time of app, over 94% prefer this over paper delivery (and you certainly do not want to use unsecured email). If you look at the initial three day (72 hour) disclosure requirement, the new three days for closing (CD) is basically the same process. The consumer is already asking ‘Hey, why can’t I get my closing documents delivered fully electronic just like I did with my initial?’ All of this, and not to mention having an electronic audit trail to show proof of evidence. If this does not finally convince all lenders and title agents to get on board, I don’t know what else will. I’m sure many will finally move once the CFPB starts fining lenders for non-compliance (just like they have been on the servicing side with mods) and pay a very costly learning experience that could have been easily avoided and delivering a superior customer experience to boot.”

 

Electronic signings? No so fast. This note from the Atlantic Seaboard: “Yes consumers would prefer electronic closings so they really don’t have to sign a hundred pages. Sounds great. As a near 30 year veteran of this industry and having had a number of conversations with other industry old timers, this is a recipe for disaster and one cause of the robosigning nightmare we went through – lost notes. In ten years how do you prove the signature is real? Over the past 30 years I have seen people try to have family members sign at closing. On one occasion the spouse passed away and they tried to use the brother. We could go on for hours with issues in electronic signings. Yes it’s the future but to rush blindly because a sample of people found it easy might not prove to be the best reason to toss aside some 70+ years of viable working procedures.”

 

And another note: “Robo-signing is not good for foreclosures or for new loan docs. No one reads anything. The CFPB is so concerned that the consumer will know what is going on and make informed decisions, then they push robo-signing where NOTHING is read. Ask any escrow person, they will tell you. The deed of trust and note must be a wet signature in my state, and the remainder of the documents can be robo-signed. It is still not a great system with too much paper. Perhaps the CFPB will come to understand that if one streamlines the regulations and paperwork, and lenders aren’t afraid to embrace it, it will help the consumer.”

 

And regarding the question of construction to perm loans in a vendor-centric, TRID-focused world, Craig Bechtle with MortgageFlex sent, “Regarding your discussion regarding Construction Perms, while I understand the difficulty that some vendors are having with the ambiguous regulation with the faint interpretation, we have had an entirely different experience. As we have a great network of compliance partners (primarily Lenders Compliance Group) and a very engaged network of client partners, we were able to collectively design Construction Perm functionality that met with the collective interpretation of the regulation. Now, it still may experience challenges as the industry sorts out all the operational issues, but from a technology standpoint, we were able to design functionality that was flexible enough to adapt to the variety of terms you will experience with construction/perm loans. What we have done provides concrete examples what can be achieved with a highly involved client base, a motivated vendor and a committed intellectual partner can do. For better or worse, due to our size we can engage customers on a more personal level and develop a solution that is theirs not our interpretation of what they should have.”

 

Gary Szymanski scribes, “In your commentary you were discussing Reg. Z and the definition of creditor and the effects on their broker needing to or not needing to issue their own LEs. You further state that many lenders will require that the broker go through the lender for the lender to issue the LEs. One item these lenders are missing is that while this process may be compliant from a federal level, these brokers also have to comply with state level requirements that may be more restrictive then Reg X and Reg Z. Many states REQUIRE that the brokers issue Disclosures to the borrowers. A lender that does not allow a broker to issue LEs may very well then wind up being compliant from a federal level, but inadvertently put themselves and their brokers in a position out being in the rough when viewed from a state level. Most reps and warrants made by lenders to the agencies and secondary market typically state that the loan was originated in compliance with all federal and state laws, rules, and regs. I believe they need to take a good hard look at not only the federal regs but the actual state level requirements in every state they do business in. I further believe many have been so focused on the federal level that many may miss the nuances of the state level requirement and therefore may wind up inadvertently being in a situation where they are making reps and warrants that are not fully compliant with the state level requirement if they are not allowing their broker originators issue LEs.”

 

 

NEWS FROM THE YEAR: 2059 (Rated: if easily offended by anything, don’t read this.)

Ozone created by electric cars now killing millions in the seventh largest country in the world, Mexifornia, formerly known as California.

White minorities still trying to have English recognized as the third language.

Baby conceived naturally! Scientists stumped.

Couple petitions court to reinstate heterosexual marriage.

Iran still closed off; physicists estimate it will take at least 10 more years before radioactivity decreases to safe levels.

France pleads for global help after being taken over by Jamaica. No other country comes forward to help the beleaguered nation!

President Chelsea Clinton bans all smoking.

George Z. Bush says he will run for President in 2060.

Postal Service raises price of first class stamp to $17.89 and reduces mail delivery to Wednesdays only.

Average weight of Americans drops to 250 lbs.

85-year and $75.8 billion study: Diet and exercise is found to be the key to weight loss.

Global cooling blamed for citrus crop failure for third consecutive year in Mexifornia and

Floruba.

Abortion clinics now available in every high school in the United States.                

Senate still blocking drilling in ANWR, even though gas is selling for 4532 Pesos per liter and gas stations are only open Tuesdays and Fridays.

Massachusetts executes last remaining conservative.

Supreme Court rules any punishment of criminals violates their civil rights.

A Couple Finally Achieved Sexual Harmony .They had simultaneous headaches.

Average height of NBA players is now nine feet seven inches with only 5 illegitimate children.

New federal law requires that all nail clippers, screwdrivers, fly swatters and rolled-up newspapers must be registered by January 2060.

IRS sets lowest tax rate at 75 percent.

Floruba voters still having trouble with voting machines.

 

 

Rob

 

(Copyright 2015 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.)