Jan. 14: Notes on the lender’s job market & training, interest rates, & Realtor survey results; is buying a hot dog a RESPA violation?

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...

Some people reading this have jobs, some don’t, but regarding last week’s 156k nonfarm payroll number I received a note asking, “Back in the Bush I and Clinton eras we supposedly needed to create 325,000 jobs per month just to break even. Where did that 325k number come from or where did it go to? If we are happy about 156k jobs being created, aren’t we about 175k short every month? Did the Department of Labor change something? Am I missing something?”

 

I have my opinion, but for an answer I turned to the noted MBA economist Mike Fratantoni who replied, “US labor force growth had dropped by more than half over the past decade or so. This is largely a result of baby boomers reaching retirement age while subsequent generations are not big enough to fill their slots and continue rapid growth. Moreover*, immigration has slowed considerably. Older workers are working at a higher rate than previous generations. But the labor force participation rate for someone in their 60s or 70s is still a fraction of someone in their 40s or 50s. And as baby boomers push into those age cohorts, the aggregate participation rate is dropping. All in, we now need just about 100k employment growth to keep the unemployment rate steady – so the 156k is good. The proof is that wages are now growing at their fastest pace in a decade. Demand exceeds supply, wages getting bid up.” (*A term often used by learned economists.)

 

While we’re on the economy, in Friday’s commentary I included a piece on the direction of rates. (“Are you positive that rates are going higher? Me neither, and there are reasons why rates may stay here or actually slide back down a bit. No one has a crystal ball…”) The write-up prompted Tom C. to contribute, “Rob, the reasons that interest rates may not go up as expected are complicated and are evolving. Your report discusses near term aspects to the markets and interest rates but does not get into the longer term economic issues like retiring/aging Baby boomers here, and an aging population in Japan and Europe, negative interest rates here and all over the developed world, Keynesian economics influence here, and in most of the major economies that increases the size of government and regulations that interferes with the growth of private enterprise.”

 

His note went on. “In the short run the 10-year range will be in the 2.00-2.75% range through mid-2018. That is, IF Trump achieves real tax reform, both corporate and individual, dramatically cuts superfluous business killing regulations, cuts down the size of government through his different cabinet appointees cutting their departments down, and killing bad regulations, if we get a good immigration plan that allows in needed immigrants, and keeps out the poorly skilled, and he does not start a trade war with China. Then we could see real GDP hit 3 plus percent by 2019 and interest rates on the 10-year could hit 4-5% by 2020. The real long term question is do we end up looking more like Japan/Europe or can we regain the entrepreneurial, free enterprise energy that propelled the US economy after WWII? Too many people want the world to be fair – but we cannot depend on government to save the day!” Thank you, Tom.

 

What about the overall job market in residential lending? I asked Jim Boghos, President of The Boghos Group. “With volume off as much as 40%, underwriters who moved for higher end comp plans are now at risk for layoff as most originators have operational capacity. The current mortgage job market is squarely focused on adding originations people. Competition for established producers is about to become as fierce as we have seen in recent years. In 2017, look for acquisition of small to medium size originators, recruitment of top performing branches and mortgage brokers continuing to convert to the lender side. Top shelf retail branches and regions originating north of $8 to $10 million per month are the main targets right now. Smaller branches have equal opportunity but the larger branches will be targeted as priority for its impact. Companies that offer excellent support, operational execution and financial transparency will control the deck. Also, make sure you have a compelling story to tell. If you don’t have one, you need to develop one because there are a ton of “me too” companies out there saying the same things hoping to recruit the same people.” Thanks Jim!

 

On the origination side, what is a market trend all managers should be focusing on if they want to boost production? I talked to Casey Cunningham, founder and CEO of XINNIX, about the importance of investing in new talent. “Recruiting new talent needs to be at the forefront of our industry’s focus. Today, the average loan officer is in their 50s. As more mortgage professionals begin to reach retirement age, the next generation is ready to step into their shoes. At XINNIX, we believe so strongly in the importance of recruitment that we’ve introduced state-of-the-art technology for our ORIGINATOR program, which is dedicated to training new loan officers to be producing mortgage professionals by giving them the knowledge, skills, and accountability they need to thrive in this industry. Now, this program is offered fully online and utilizes video, interactive exercises and competitive gaming activities, making it more accessible and engaging to new mortgage professionals entering the industry. We are investing in the next generation because they are the future of our industry. And with proper training, new talent can be a highly successful part of the team. Our ORIGINATOR graduates average 3.1 loan applications in their first month after the program. Recruiting the new generation of mortgage professionals is essential for moving our industry forward.” Thank you, Casey.

 

Recently the commentary mentioned a $45,000 settlement in Minnesota between a title company, which had a boat/dinner cruise for clients, and the Minnesota authority. Is taking clients on a cruise illegal? It prompted Louisiana attorney Marx Sterbcow to write, “The RESPA enforcement does seem to be getting extreme as I’m seeing state attorney generals in conjunction with provincial regulators issuing subpoenas or opening up actions involving really innocuous things such as…. a tin foil container full of ribs or hot dogs. This is starting to have a chilling effect as I’m seeing companies withdraw from all legally permissible marketing & Advertising because they are seeing their friends who provided 20 ribs or 50 hot dogs cost wind up having to pay $40k-100k in ESI document production and attorney’s fees. It’s a different environment and I don’t see this slowing down regardless of who heads up the CFPB.

 

“Here are two different cases involving different lead regulators however the same supporting regulator is the back-seat driver: one involves a bank/mortgage company and the other involves a real estate brokerage. Readers should pay close attention since if you bought someone a hot dog or threw down the ‘buy one get second hot dog free coupon’ you just violated the law under these and need to produce a receipt to the government so you can self-incriminate yourself in your own document production. And in both cases this is exactly what the government is seeking one simple pricing differential.

 

Your readers should always remember that social media is the regulators best friend so those fun pictures you posted on Facebook or Instagram just cost you $50k in ESI production because you posted a picture of you and another settlement service provider eating a hot dog at the same event and the other settlement service provider posted, ‘Thanks for the hot dog!’” Thanks Marx!

 

Sleuthing around a little shows some state-level differences. For example, “Documents sufficient to show the value and frequency of any rebate, discount, abatement, credit, reduction of premium, special favor, advantage, valuable consideration or inducement, fee, kickback, or thing of value, including but not limited to free or discounted meals, provided to XYZ Mortgage in XXXXXX, Alabama. In lieu of providing the actual documents, you may provide a sortable Excel spreadsheet containing the date, value and description of the specified benefits provided.”

 

And in Florida, “Documents sufficient to show the value and frequency of any rebate, discount, abatement, credit, reduction of premium, special favor, advantage, valuable consideration or inducement, fee, kickback, or thing of value, including but not limited to free or discounted meals, provided to REALTOR Suzy Q or XYZ real estate company in XXXXXX, Florida. In lieu of providing the actual documents, you may provide a sortable Excel spreadsheet containing the date, value and description of the specified benefits provided.”

 

The topic prompted attorney Brian Levy to contribute, “While ‘anti-inducement’ laws that directly impact title and insurance companies in many states can be like RESPA on steroids, under RESPA itself, an enforcement authority needs to not only prove that the hot dog was a ‘thing of value,’ but also that it was ‘in return for referrals.’ As a native Chicagoan, I have deeply held opinions on what would constitute a hot dog that could be a thing of value (none of which would involve ketchup). I also believe, given the right narrative, that even if a hot dog is a thing of value, that it could be provided as a legitimate marketing expense (or even in response to a social convention) and not simply as a kickback for referrals. Frankly, (pardon the pun) the ‘hot dog as RESPA violation’ is a ridiculous case to bring and a hard one to win for the regulator. Still that doesn’t mean that a regulator with an axe to grind can’t make life tough on regulated entity by imposing huge discovery and legal defense costs to prevail.” Thank you, Brian!

 

Real estate agents are home buyers’ most important source of information about new homes after the Internet. Last year, 33% of buyers learned about their new homes via a real estate agent. Agents’ influence is not declining despite consumers’ use of the Web, and for most new home transactions, Americans still prefer a real estate agent. Last year, 87% of buyers purchased their home through a real estate agent or broker—a share that has steadily increased from 69% in 2001, per the National Association of Realtors.

 

And bankers and lenders have thoughts on this. “Together, realtors and MLOs can ease buyer concerns around confusing paperwork and unexpected costs, making the home buying process as seamless as possible,” said Ryan Bailey, Head of Mortgage, TD Bank. “We’re invested in making a positive impact, and this is part of what makes our bank different.”

 

As it turned out, TD Bank released the results of its Triple Play Conference Survey, which uncovered that despite realtors’ strong home buying outlook for 2017, they are losing sleep over the home buyer experience. As a value add for their buyers, realtors should partner with mortgage loan officers (MLOs) to offer a more seamless home purchase process, especially for first time homebuyers, who are expected to be driving the market in 2017.

 

Key findings of the survey include that Realtors expect sales to increase in 2017. Most (55%) realtors expect home sales to increase in 2017, and 70 percent of the realtors surveyed are expecting single-family homes to be the highest type of home in demand this year (versus condos/townhomes, multi-family homes and apartments). Technology is imperative to the home search. 44% of real estate agents said online home shopping via Zillow, Trulia and/or Realtor.com will be the biggest technology influence on the home buying process in 2017.

 

Realtors brought up buyers’ top concerns. The survey showed that the top two concerns for realtors in 2017 are home inventory and mortgage qualification. Realtors said that buyers’ top concerns are confusion around paperwork, followed by unexpected costs and concerns over financing

 

What do agents value most in a mortgage loan officer? Most realtors (79%) look for efficient communication and responsiveness when working with an MLO, followed by guidance with navigating the finance process, competitive rates and expertise on managing the regulatory landscape.

 

 

A little boy returned from the grocery store with his mom. While his mom put away the groceries, the little boy opened his box of animal crackers and spread them all over the kitchen table.

“What are you doing?” asked his mom.

“The box says you shouldn’t eat them if the seal is broken,” said the little boy. “I’m looking for the seal.”

 

 

 

Rob

 

(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.)