Aug. 6: VPs on housing; notes on Reg. Z & HR 2121; alternative to plywood for vacant buildings; Barclays moves to voice recognition!

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...

Today’s commentary was early today since I have to practice for the hoplitodromia. What is that? A sport, like many others, that was in the Olympics 3,000 years ago but no longer. And no entrails were read during the making of this commentary.

 

The link between politics and housing continues. Housing has not been a huge issue with the candidates although first-time home buyers are bearing the brunt of the appreciating market in many urban areas. But Hillary Clinton’s choice for presidential running mate, Virginia Sen. Tim Kaine, has had some experience with the housing industry. He “cut his teeth” as a young lawyer fighting for fair housing issues, winning a $100 million jury verdict against Nationwide Insurance over allegedly discriminatory lending practices – “redlining.” “I brought dozens of lawsuits when I was in private practice, battling banks, landlords, real estate firms, insurance companies and even local governments that had treated people unfairly,” Kaine said.

 

Kaine joined a small firm in Richmond, now called McCandlish Holton, where he focused largely on fair housing matters including the most high-profile case was brought on behalf of a local non-profit, Housing Opportunities Made Equal (HOME), which alleged that Nationwide Mutual Insurance Co. had discriminated against African-American neighborhoods through the practice known as redlining.

 

On the other side, Trump has not made housing issues a centerpiece of his campaign, but from what is known, he plans to discontinue funding of at least some government housing programs and work to ease the current regulatory framework. Reporter Kendall Baer writes, “For example, he has specifically alluded to the possibility of eliminating HUD. Indiana, where Mike Pence serves as governor, was one of the states hit hardest during the financial crisis. By January 2015, vacant homes were an exponential problem for the state. In response, Pence passed a vacant housing statute preventing municipalities from passing ordinances on vacant homes and protecting banks holding liens from regulations requiring their maintenance.

 

“’Really, the bottom line is we have made a dramatic effort to allow the local government to be the catalyst to clean up neighborhoods,’ state Senator Jim Merritt, an Indianapolis Republican who sponsored the bill said at the time. ‘It makes it a quicker process and a cleaner process.’”

 

“Further, under Pence’s watch the Indiana legislature initiated the Blight Elimination Program (BEP) to assist local government units in Indiana with foreclosure prevention. This program is sponsored by the Indiana Housing and Community Development Authority, a state government housing program.”

 

Eliminating blight is never a bad thing, right? As mentioned in this commentary the state of Ohio has amended provisions regarding its judicial foreclosure process as part of a bill signed by the governor. The bill amends, enacts, and repeals many provisions.

 

Laws are one thing, but implementing foreclosure rules is another, especially at the property level. Along those lines I received this note, and yes, a bit of a sales pitch, from Heather Best. “With all of the talk lately about ‘Zombie Properties,’ clearboarding is a solution servicers have tried that works!  Here’s what we’ve seen.

 

“Plywood has been the standard material for boarding up vacant and abandoned buildings. But plywood has become the ugly stigmatizing symbol of community blight. Plywood announces that a building is vacant and abandoned, sending a distress signal of a neighborhood in trouble.

Clearboarding cannot be removed (when installed with the compression bracing bar) so it prevents squatters and vandals from gaining unwanted access.

 

“This new practical and attractive alternative to plywood ~ clearboarding, utilizes clear polycarbonate. SecureView (as well as the polycarbonate from the other providers) looks like a glass window, so it doesn’t broadcast that a building is vacant and abandoned. It’s virtually unbreakable too, so vandals can’t get in – check out how durable & aesthetically appealing clearboarding with polycarbonate is.

 

“Communities are clearboarding their properties with polycarbonate that have been plywood boarded several times, that are hubs for crime, drug activity, squatters, etc., on vacant properties where boarding would significantly impact surrounding property values, and on vacant properties near major city centers (public parks, rec centers, hospitals, libraries, etc.).” Thanks Heather.

 

Recently the commentary had a note about brokers changing compensation under Reg. Z. Scott Flaherty with LendSmart in Minnesota, wrote, “As it relates to your compensation example, brokers need to remember that they can’t change their compensation at all, let alone during a transaction. By that, I mean that brokers aren’t supposed to have the ability to decide that their compensation will be 150 basis points with one lender and 200 with another. I know it still happens a lot but it is not supposed to.

 

“According to LO comp rules, a broker is supposed to choose one compensation schedule for all loans they do with every lender, just as a creditor has to pay their LO the same on every transaction. I still see a lot of brokers setting up LPC as 100 at one place, 150 at another and 200 at another so they can then choose to offer lower rates to some of their borrowers if in competition. That flies in the face of the rule that is intended to take away the ability for originators to control the price to the consumer…let alone the Fair Lending issues it creates. It’s frustrating to see that happening so much still across the country. To bring it back to the original point, if you can’t choose a comp plan prior to an LE because of LO comp, why would you be able to choose to lower your comp at any point during the transaction?”

 

Last Saturday this commentary had an opinion piece about H.R. 2121 regarding transitional licensing. It elicited several responses, most in favor of it.

 

For example, John Hudson, VP at Mortgage Financial Services, writes, “Any mortgage broker or branch manager that is looking to expand and grow their business should be in favor of LO Transitional Licensing. In addition to allowing ‘qualified’ originators from depository institutions to serve consumers at nonbank firms, HR 2121 provides a framework for universal MLO transitional licensing…which is the ultimate goal.”

 

Pete Mills with the MBA sent, “Rob – regarding the opposition expressed recently to HR 2121 based on ‘consumer protection concerns’…I would urge folks to read and understand the steps MBA and the Conference of State Bank Supervisors took to address all of the “what if” scenarios to ensure that states retain both the authority and the ability to mitigate consumer concerns. As a result of these efforts between industry and the regulators, the bill passed the House Financial Services Committee and the full House on bipartisan, unanimous votes. HR 2121 makes the licensing system better and more efficient for all MLOs and nonbank originators, while ensuring consumer protection concerns are addressed.

 

“The 2008 SAFE Act was enacted to assure consumers that mortgage loan originators (MLOs) meet minimum qualification standards through licensing and registration. Under the SAFE Act and related federal regulations, there are two types of MLOs: ‘Licensed MLOs’ work for nonbank lenders. They are required to take pre-licensing education, pass a test, clear a background check, and be registered in the Nationwide Mortgage Licensing System (NMLS).

 

“’Registered MLOs’ work for federally-insured depository institutions. They are required to be properly trained, pass a background check pursuant to federal banking regulations, and be registered in the NMLS.

 

“This two-tiered system makes it difficult for MLOs to move from registered status to licensed status because it can take 60-90 days or more to complete the licensing process in the states. As a result, MLOs are limited in their employment options, and state regulated mortgage companies can’t compete for LOs that work for banks.

 

“By creating a transitional authority to originate for experienced bank MLOs moving to a nonbank, H.R. 2121 maximizes the career options for experienced MLOs while sustaining the important consumer protections that the SAFE Act put in place.” Thanks Pete!

 

And Craig Jarrell with IberiaBank Mortgage Company writes, “There seems to be some confusion about working for a bank as an originator. We have to take 20 hours of classes every year from our bank’s online university, pass a background check and credit check to be employed, and we have to be fingerprinted. And pass the FBI criminal check. The only thing I did not have to do at my bank is take the state exam. I formerly had my mortgage broker’s license, and would happily and easily take the test, I have 40 years of experience, and I work at a bank for benefits, better underwriting and processing, control of my own fundings and better products, not to avoid the minor inconvenience of being tested. That being said, it should be easy for all originators to switch companies, and not lose money, just because they went to a competitor.”

 

In a slightly different vein another bank originator wrote, “Probably 60% of the people who apply here each year to be originators fail the credit check! It is very hard for us to hire anyone from our non- bank competitors – we’re not sure how they got their license!”

 

Let’s hope they don’t fail the credit check due to a stolen identity: FICO reports about 9 million Americans have their identities stolen each year. And cybercrime doesn’t only pertain to software. Did you know that anyone can now print out all TSA master keys?

 

And how about this story that Interpol just busted a Nigerian internet kingpin?

 

The world of cybercrime is very real, and as this this note from someone in the health care industry shows it is not confined to banks and lending. “I’ve been responsible for IT in a mid-sized health care organization for several years. Rather than breakdowns, outages, or system malfunctions, I was most concerned with internal and external cyber security. The user access, redundancy, software updates, preventative maintenance, virus patches, and fail-over/disaster recovery processes could all be effectively managed with appropriate controls and investment, but not so regarding security. We spent millions on it to protect patient safety, good clinical outcomes, patient privacy, and the financial integrity of the billing information because we consistently documented 30,0000 to 40,000 hacking attempts on our system per month. In addition, we fought off a few ‘robo-hacking’ attempts, originated from the Pacific Rim, bombarding our system through third parties. The threat is very real. It only takes one breakdown!”

 

Research by Deloitte finds that in some cases, companies that suffered a cyber incident saw a one level downgrade in rating by credit rating agencies. Meanwhile, other informal research by Deloitte among leading providers of cyber insurance found it is not uncommon for policyholders to see 200% increases in premiums for the same coverage post cyber-attack (or possibly even be denied).

 

How about this one?! British bank Barclays began identifying customers using voice recognition biometrics starting this week, as it seeks to eliminate passwords.

 

The commentary discussed some TRID clarifications from the CFPB, and Jay Coomes from Fiserv produced a comment/advice for readers. (Jay is vice president of product strategy, Financial Risk Management Solutions, Fiserv. He manages a Fiserv product called LoanComplete that helps financial institutions streamline loan processing, reduce costs and ensure regulatory compliance.)

 

According to Jay, in the wake of the CFPB’s proposed amendments, and especially while the industry can still comment on the proposal, quality control (QC) is more important than ever before. While uncertainty remains in regards to what TRID will look like in its final form, it’s crucial for lenders to focus on QC checks from origination through closing. Plus, the cost of proper QC checks will very likely be less than the cost associated with any error / violation, so it’s worth the investment in the upfront.

 

“While uncertainty remains in regards to what TRID tolerance issues and examinations the CFPB will focus on, we do know that it is crucial for lenders to focus on automated pre-close QC checks to reduce post-close issues. Lenders that use loan completion solutions to automate and harden their TRID pre-close processes increase the quality of pre-close CD’s, provide compliance checks while improving data accuracy and documentation of compliance.

 

These automated loan completion processes facilitate the timely and accurate exchange of information between the lender, borrower and third-party service providers. They also confirm the receipt of information, which can be used as evidence of TRID compliance. The result is improved accuracy of data and documentation throughout the collaborative process needed to create a closing disclosure with reduced risk for the lender and improved customer satisfaction.”

 

 

Tired of the administrative hassle and health insurance claims bureaucracy, a gynecologist decides to retire in his early 50’s. In looking for a new vocation, he attends an auto mechanic school which he thoroughly enjoyed. The final examination was to take an eight-cylinder engine apart and reassemble it within five days’ time which he was able to complete.

A few days later, the good doctor received a grade of 150%. In questioning the instructor, he received the following response:

“You got 50% for taking the engine apart properly, another 50% for reassembling it on time and a bonus of 50% for doing the entire process through the muffler.”

 

 

Rob

 

(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.)