Apr. 22: Letters on reverse mortgages, the FHFA, and IMB’s role in lending; how many people live here? Saturday Spotlight: Argyle
Want some good U.S. lender news? Yes, the inventory of homes for sale is pitifully low, but “buyers are gaining purchasing power, with ATTOM Solutions reporting wage growth outpaced annual home-price changes in 76% of analyzed counties in the first quarter.” Five thousand miles from San Francisco, as of 2018 there were 8.5 million abandoned vacant homes (14 percent of the housing stock) in Japan, which has experienced both a population decline as well as depopulation in many rural areas. Some estimates have the number even higher, at 11 million such vacant homes (“akiya”) and forecasts that by 2033 they could account for 30 percent of all houses in Japan. Municipalities and companies are trying to get them in the hands of younger buyers with cash to upgrade and renovate them. And while we’re on big numbers, there are roughly 8 billion people living on earth, 35 percent of whom live in either India or China. According to a new report from the United Nations, India has formally surpassed China as the most populous nation, with 1,428,600,000 people compared to China’s 1,425,700,000 people. In third place is the United States, with 340 million. China’s population growth has slowed much faster than India’s, hitting 0.53 percent average annual growth over the past 10 years, down from 0.57 percent from 2000 to 2010, with the population even decreasing in 2021.
Saturday Spotlight: Argyle Simply Powerful Payroll Connections
In 3-5 sentences, describe your company (when was it founded and why, what it does, where, recent growth and plans for near-term future growth).
Founded in 2018, Argyle is modernizing financial services in ways that improve business efficiencies and transform lives. Reliability, scalability, security, and ease of use are the guiding principles behind Argyle’s market-leading technology.
Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why.
We are a diverse bunch from around the globe and so we allow flexibility for people to pursue their own unique interests and engage in community or charitable work. We do not count the hours or vacation days to allow this freedom to choose where and when people want to invest their time the most. One cause that resonated with all of us last year was the support for Ukraine. We encouraged Argylers to donate to fundraisers, charities, and NGOs that support Ukraine and its people by pledging to match the donations, resulting in a total of $120k+ donated over a week.
What does your company do to help elevate your employees’ growth? Describe any mentoring programs, outside classes or training, in-house training. How does the company help people develop?
At Argyle we have a continuous advancement philosophy. We provide the space for people to advance quickly, experiment with ideas, try new things and disrupt their careers. We support and recognize both individual and professional growth through an open feedback culture, peer recognition and regular appraisals.
Tell us how your company maintains its culture in a work-from-home environment, or how you plan on bringing employees back into the office, if applicable.
As a fully remote, asynchronous company, we have defined communication and culture protocols at the start. That means everyone comes into Argyle on the same page. No one is more a part of the team because of their proximity to headquarters. On the flip side, no one feels alienated or “offshore,” because we are all in the same remote boat, or really, on equally remote islands. We record everything, crowdsource feedback, employ fewer, more effective communications tools, practice full transparency, systematically monitor team sentiment, and create opportunities for our team to get to know each other.
Things you are most proud of that don’t have to do with sales.
First, we are so proud of our people. The Argyle team is a diverse group of 135+ individuals across 19+ countries committed to a remote-first, asynchronous approach.
Second, almost one in four consumers struggle to qualify for essential financial services like credit cards, auto loans, mortgages, and even renting a home. Argyle empowers consumers to share data from alternative sources, such as including payroll records, bank statements, and bill payments, when traditional credit scores fall short. This not only allows lenders to evaluate financial health and credit risk on a deeper, more precise level, it also allows them to expand their addressable market to millions of consumers typically excluded from the credit system.
Fun fact about ARGYLE.
The original name of our company was actually Robin because that is where we used to get sushi in San Francisco. We ended up going with Argyle through inspiration from a retired yacht builder in Florida whose first vessel was named Argyle. We hope we did it justice!
(For more information on having your firm’s extracurricular activities, employee growth, and your charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)
A letter to the FHFA, overseer of Freddie and Fannie
Jeff Reeves, President/CTO of Canopy Mortgage, LLC, sent his “Open Letter to the FHFA.” “I have heard that FHFA is assembling (or has assembled) a special task force of industry professionals to advise on how the federal government can further stimulate innovation in mortgage lending. Though not as sexy as the grandiose ideas of mortgage on blockchain or ChatGPT handling everything from customer service to underwriting loans, there is one incredibly obvious innovation I’d recommend for FHFA and its task force.
“Consider the hundreds of millions of dollars (and hours) that lenders waste each year in wages and fees to vendors requesting, processing, and analyzing tax return and transcript data. Now consider a better way to do this by leveraging a family relationship.
“Fannie, Freddie, and the IRS are siblings, children of the same federal government. Why haven’t Fannie and Freddie integrated with the IRS in much the same way they have integrated with the monopoly otherwise known as The Work Number? Imagine if DU or LPA cross referenced the IRS database each time a lender ran either of the two AUS’s to confirm that the submitted self-employment income (and even employment income and other incomes) was accurate. Hey, Fannie, has SSN 123-45-6789 really made $178,394 on average over the last two years? Or, Freddie, did SSN 9876-54-321 have rental income of $3,456 last year?
“DU/LPA would even be able to return messaging like, ‘John Doe earned $13,786 last year at McDonald’s. His new $120,000 salary at Nick’s Nursery seems a bit of an excessive increase.’
“Not only would this mostly eliminate loan fraud based on misrepresented income on GSE loans (and all FHA, VA, and non-conforming loans run through the AUS’s), it would forever eliminate the need for borrowers to execute 4506’s and for lenders and the IRS to spends hundreds of millions of dollars each year in wages and vendor fees to process all of that paper. And I won’t even mention the terabytes of data we all consume storing tax returns and transcripts in our systems of record.
“Nor will I opine on the security risk that lenders and borrowers assume because loan officers and processors often download tax returns provided by their clients on their work or (worse yet) personal devices as part of their business process. All of that goes away if the FHFA will mandate this kind of integration between DU/LPA and the IRS. None of the nonpublic information on tax returns or transcripts would ever need to leave the secure, closed tunnel between the three government agencies. Imagine the confidence loan officers and lenders would have prequalifying loans in a world where this GSE to IRS integration exists. That confidence will benefit everyone in the home buying and financing ecosystem.
“The FHFA and the Biden administration could take all the credit for the innovation. Imagine the glowing press release that all national publications would gladly publish touting how the FHFA just secured consumer tax data, lowered the cost of getting a mortgage loan, eliminated much of the loan fraud based on income misrepresentation, and created greater confidence for lenders to lend, all of which will trickle down to improve the health of the mortgage and housing market.
“Surely this can’t be an original idea. And if so, why hasn’t it happened yet? FHFA, it’s time to do this.” Thank you, Jeff.
The role of independent mortgage banks
Dave Stevens, CEO of Mountain Lake Consulting, Inc., recently wrote about how independent mortgage banks are expanding access to homeownership using data from the Housing Finance Policy Center’s March Monthly Chartbook. “The data highlights two things. First, the FHA program does more loans to minorities than any other agency or private label lending source so much so that it dwarfs the GSEs, VA, and others. Second, if it weren’t for independent mortgage bankers (IMBs) the opportunity to get into homes for first time homebuyers would be significantly constrained.
The piece went on, and ended with, “So the conclusion is simple really, all made clear by the Urban Institutes Monthly Chartbook. The FHA is the program that has the vast majority of minority purchase loans, and IMBs do approximately 90 percent of these mortgages. And they do this much simply because they use the entire credit set provided by FHA and the other programs thus allowing lower FICOs and higher DTI’s than banks… when it comes to expanding affordability and access, it’s simply the Independent Mortgage Banker that fills this role.”
The Mortgage Bankers Association has input. “On the heels of February 2022 Urban Institute research on bank and nonbank lending to minorities, MBA asked Urban to use the same methodology with updated 2021 Home Mortgage Disclosure Act data to extend the analysis to key states and to cover lending to low- and moderate-income borrowers and communities.
“The report, ‘An Assessment of Lending to LMI and Minority Neighborhoods and Borrowers,’ highlights the important role and performance of nonbank mortgage lenders in the context of CRA reform. Comparing lending by banks (who are subject to the CRA) with lending by IMBs (who are not subject to the CRA, except in Massachusetts), the findings reveal that IMB lending to LMI neighborhoods, predominantly minority neighborhoods, and LMI predominantly minority neighborhoods is much higher than bank lending in those neighborhoods. This analysis is robust at both the national level and across most of the states that Urban looked at.
“We commissioned a study with Urban Institute to look at nonbank vs. bank lending to minority and LMI borrowers. You’ll see that, not surprisingly, IMBs outpace their bank counterparts in lending to these groups at a national level, and already in states where CRA requirements are under consideration.”
Ed Hensley, with WesBanco Bank, sent, “There are questions about why Banks are now a small percentage of FHA originations as opposed to IMBs. Ask Chase and Jamie Dimon, among others, about the huge penalties they have faced under the False Claims Act originating FHA loans. Banks are under an extreme competitive disadvantage because of the perceived mentality by the Feds over ‘deep pockets’ of Banks. Chase still buys servicing for FHA but won’t take the risk originating. Banks are much more regulated than IMBs. I work for a medium-size Bank, and in any given month, have ten audits from internal, CFPB, FDIC and states. Do IMBs have this much regulation and oversight? No. Therefore, they can take more risks. Let’s compare Neighborhood Watch statistics among IBMs and Banks and see if we truly are on the same competitive field.” Thank you, Ed.
And Rob Chrane with Down Payment Resource noted, “Thanks for mentioning some thoughts on how independent mortgage banks are expanding access to homeownership as evidenced by the Housing Finance Policy Center’s March Monthly Chartbook. Yes, the FHA program does more loans to minorities than any other agency or private label lending source. And yes, policymakers better wake up to the critical role IMBs play in achieving the government’s espoused goal of serving the underserved before they screw it up. Without IMBs, access to homeownership would be significantly constrained.
“But there’s more. Data dramatically underscores that the FHA and lenders of all types can and need to do more!
As part of the “Barriers to Accessing Homeownership Down Payment, Credit, and Affordability – 2018”, Down Payment Resource and the Urban Institute’s Housing Finance Policy Center found a startling gap between the number of FHA borrowers who participated in down payment assistance (DPA) programs vs. the number of those who were actually eligible to benefit from these programs.
“Pages 25-28 of the report show that 60-70% and more of FHA borrowers across 31 major MSAs were eligible for an average of 6 DPA programs, each providing close to $10,000 in assistance. According to the FHA’s own reporting, only about 15% of FHA borrowers are afforded these benefits. Why the huge gap? It’s because most borrowers aren’t even aware such help is available. This fact was most recently pointed out in KeyBank’s report on the state of fair housing although ours and other people’s data indicate their poll results are understated compared to reality.
“The FHA, HUD, the GSEs, the Federal government and all public and private housing stakeholders, including their trade groups, can start by using their collective megaphone to broadcast a simple, unified message to the public: ‘Down Payment help is available. See if you’re eligible.’. This tactic worked in 2009-10 to publicize the First Time Homebuyer Tax Credit program, and it will work even better today.” Thank you, Rob.
Reverse mortgages: a growth industry
CrossCountry’s Steve Kaye writes, “Considering all of the ‘positive’ news about today’s earnings and affordability when compared to the same a dozen years ago, I was thinking that I seldom see anything in your reports about reverse mortgages. And with the value of our dollar shrinking, concerns for affordable housing increasing, and recent instability on wall street when it comes to our investments, combined with the fact that 10,000 baby boomers are turning 65 each day (continuing for the next 4 years), it might be a topic of discussion that carries a little more merit. Consider: It’s not a coincidence that many top nationwide mortgage companies, including CrossCountry, Amerifirst, Loan Depot, New American and Fairway, have hired new national reverse division vice-presidents and leaders since the first of the year. It’s like I’ve been saying, it’s time to move forward with reverse!” Thank you, Steve.
Sure enough, the National Reverse Mortgage Lenders Association pointed out that, “Homeowners 62 and older saw their housing wealth grow by 1.95 percent or $226 billion in the third quarter to a record $11.81 trillion from Q2 2022, according to the latest quarterly release of the NRMLA/RiskSpan Reverse Mortgage Market Index… The increase in older homeowners’ wealth was mainly driven by an estimated 1.95 percent or $268 billion increase in home values, offset by a 1.93 percent or $42 billion increase in senior-held mortgage debt.
“NRMLA President Steve Irwin, said, ‘Multiple studies published over the past couple of years highlight the challenges faced by women to save for retirement because of competing priorities, such as caring for children or an aging parent or relative. Nevertheless, they own a substantial asset, their home. Therefore, when meeting with a financial planner, or other trusted advisor, it’s very important to consider home equity as a strategic asset that can be used to help enhance retirement security.’ “To date, more than 1.3 million households have utilized an FHA-insured reverse mortgage to help meet their financial needs.”
Yes, lenders and investors are increasingly interested in reverse mortgages. For example, Plaza Home Mortgage, in its April 8 newsletter, highlights Streamline Reverse Title Orders, Connect the Pieces of Reverse, Reverse Calculator, Get a Pre-Qual.
“Today on a drive, I decided to go visit my childhood home. I asked the people living there if I could come inside because I was feeling nostalgic, but they refused and slammed the door in my face. My parents are the worst.”
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