Dec. 5: Marijuana & the lending biz; CFPB e-mail addresses for help; Dodd-Frank’s impact on company size

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...

Looking at things from a macro level right off the bat Mike McMahon contributed, “Rob, your comment that big banks have the staff to comply with the complexities of Dodd Frank’s and more reminds me of a comment that Lloyd Blankfein, the CEO of Goldman Sachs. He said something to the effect that Dodd Frank was good for Goldman because only the biggest banks would have the resources to deal with it. To the extent that it true, Dodd Frank encourages banks to get bigger, which is not what the regulators want and the latest bank capital requirements penalize the biggest and most complicated banks.”

 

Down to the micro level, this from a veteran originator regarding TRID. “Rob, I’m trying to close a couple loans with a major national lender. I was trying to schedule them and asked the closer a question resulting in, ‘We must set the closing date out at least 6 business days; however, we can close 3 business days after the CD gets acknowledged by the client so we could realistically close prior to 6 business days from now, but I still must set the closing date 6 business days out to set the proper expectation.’

 

“In the past 2 days I have had 3 lenders call me to ask TRID questions. How bad is the info coming out of CFPB that it has no scenarios and answers to questions like this? The CFPB said it would have full disclosure – okay, where is the info?”

 

An answer to that is that lenders do have some access points to the CFPB. Below are the contact emails for the appropriate areas to address technical issues like this. The CFPB advises that the regulatory inquiries email address is the best point of contact: CFPB_RegInquiries@cfpb.gov for specific regulatory interpretation questions, and CFPB_MortgageRulesImplementation@cfpb.gov for feedback and suggestions about regulatory implementation resources. The email will prompt an inquiry which will be tracked and addressed.  Depending on complexity, an email response to close the matter may be composed, but much more likely the issue will be addressed by phone.

 

Regarding whether or not “Know Before You Owe” is slowing the home financing process down, Noel Cookman from The Mortgage Institute in Texas contributes, “Most loans that closed in October did not close under the new TRID rules – they were probably all disclosed under the old rules and, therefore, not subject to the LE and CD or the 3 days. I have several loans in my queue that were disclosed under the old rules and will close with a HUD-1, without the 3-day waiting period after the final CD is delivered. That might account for a relatively low delay rate and timing issues in loans closed in October.”

 

And from Austin, TX, I received this note. “You commented that, ‘According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, the new integrated disclosure rules did not result in significant delays. For home sales closed in October, loans related to the FHA saw a slight decline in the share of mortgages that closed on time compared with September, from 59.4 percent to 57.1 percent. During that same time period, the share of VA loans closed increased from 60.1 percent to 65.5 percent, whereas FHA loans closed within 47 days in September and then slightly increased to 47.2 days in October. Some realtors have mentioned that despite, TRID, the process has still remained smooth, while others have expressed a delay in closings.’

 

“This will be different for November than for October.  Most of October loans were Non-TRID.   About 75% of my November loans were TRID. I have many closing teams and one team, as an example, had 25% of its end-of-the-month closings get moved to December (5 days into December) because they were TRID loans. They were scheduled to close but had delays because of missed disclosures or inability to generate docs on time.  No doubt this will improve over time but November had significant delays and I expect December to also have delays. Of course December will benefit from the missed November closings. Based on reduction in total revenue for November, I would estimate 20% of our TRID files were delayed 3 to 5 days.”

 

From Northern California came this note. “I actually think this TRID debacle could end up helping us IF consumers push back. I have a very savvy client in southern California who didn’t appreciate me telling him he had to wait to sign — all the while facing the very real prospect that he’d have no place to live as a result. I told him to write his representative and he did…”

 

“Rob, I’m a real estate broker that specializes in helping seniors downsize. I’d like to add the reverse mortgage component to my business. Do you know a lender that either does net branches or may have the desire to add a real estate broker to their business?” I didn’t have any idea, so I turned to John Yedinak, the editor of Reverse Mortgage Daily, who offered up, “I can’t think of any big net branch off the top of my head. But the industry is pretty small, but I’d recommend you go to the lender list at NRMLA and that should be a good place to start.”

 

Zillow recently published the top 5 markets that will most likely be impacted by the new 2016 conforming loan limits released by the Federal Housing Finance Administration. The new loan limits will impact 39 counties in the U.S. and about 61,000 homes nationwide. The cities that will experience the greatest impact from the revision include Denver, Seattle, San Diego, Boston and Nashville where the conforming loan limits have all shifted upwards, which could result in a reduction in jumbo loans in these areas. The conforming loan limit in Denver made the greatest jump from $424,350 to $458,850, with about 21,000 less homes requiring a jumbo loan. This also translates into the greatest drop on the share of local properties in need of a jumbo loan from 14 percent to 1.1 percent in Denver.  In Seattle, 15,000 fewer properties would need a jumbo loan, with the share of properties requiring such a loan only dropping from 14.5 percent to 14 percent compared to 10,000 less homes in San Diego and a shift from 22.4 percent to 16.4 percent of homes requiring a jumbo loan. To read more about Zillow’s article, click here.

 

What do Forbes readers think about residential mortgage banking? The MBA did a good job of priming the magazine with facts and figures, but, as best I can tell, lenders around the nation are doing just fine. Certainly the US bond market has been defying naysayers despite looming interest rate increases and corporate America’s debt binge. The bond market has seen gains six of the past seven years, and bonds are outperforming assets like gold and global real estate, though high-yield bonds still look risky, according to new data. About $1.16 trillion in high-yield bonds have been issued since the beginning of 2012, SIFMA data show. Research magazine

 

Everyone once in a while an underwriter will encounter a file where some or all of the income comes from the marijuana business. They then run up against the problem others have, and that is while some states allow for this business line, others do not, nor does the Federal Government. And since Fannie & Freddie are under government conservatorship, and many banks who are correspondent investors are overseen or insured by the Federal Deposit Insurance Corporation (FDIC – an independent agency created by the U.S. Congress), and Federal law usually trumps state law, well, you get the picture…

 

But if you are still trying to figure out where a potential opportunity might exist in the pot biz, and lending to those in it, and where the line is perhaps around what is and is not a marijuana-related business, perhaps guidelines from The Financial Crimes Enforcement Network (“FinCEN”) will help you. In its guidance on this subject, FinCEN discusses a memo sent by Deputy Attorney General James Cole (the “Cole Memo”) that updates guidance to federal prosecutors around marijuana enforcement at the federal level.

 

He instructs prosecutors to use their resources to enforce the laws on “persons or organizations” whose conduct interferes with important priorities that include: preventing the distribution of marijuana to minors; preventing revenue from the sale of marijuana from going to criminal enterprises, gangs and cartels; preventing the diversion of marijuana from states where it is legal under state law in some form to other states; preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity; preventing violence and the use of firearms in the cultivation and distribution of marijuana; preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use; preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands; and preventing marijuana possession or use on federal property.

 

In addition to this FinCEN guidance, Cole issued supplemental guidance directing prosecutors to consider enforcement priorities with respect to federal money laundering, unlicensed money transmitter, and BSA offenses predicated on marijuana-related violations of federal law. As you can see from the rules and regulations around this subject the states and the feds do not entirely agree so things remain smoky. (Get it?) For bankers are large lenders right now, until federal laws change, pretty much everyone argues that doing business with marijuana-related businesses probably smells iffy at best.

 

What about HUD and any multifamily information or guidance on marijuana use in assisted housing? Ballard Spahr did a recent piece on it, but once again we find that it doesn’t work so well, if at all.

 

 

(Rated PG/R, depending…)

Yesterday my daughter e-mailed me again, asking why I didn’t do something useful with my time.

“Like sitting around the pool and drinking wine is not a good thing?” I asked.

Her talking about my “doing-something-useful” seems to be her favorite topic of conversation.

She was “only thinking of me”, she said and suggested that I go down to the Senior Center and hang out with the gals.

I did this and when I got home last night, I decided to play a prank on her.

I e-mailed her and told her that I had joined a Parachute Club.

She replied, “Are you nuts? You are 78 years old and now you’re going to start jumping out of airplanes?”

I told her that I even got a Membership Card and e-mailed a copy to her.

She immediately telephoned me and yelled, “Good grief, Mom, where are your glasses? This is a Membership to a Prostitute Club, not a Parachute Club.”

“Oh man, I’m in trouble again,” I said, “I really don’t know what to do. I signed up for five jumps a week!!”

The line went quiet and her friend picked up the phone and said that my daughter had fainted.

Life as a Senior Citizen is not getting any easier, but sometimes it can be ever so much fun.

 

 

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.)