Apr. 28: Note on mortgage languages, LO advice in a purchase market, credit unions; tech update – Chase’s blockchain security

The extent of my tech/IT knowledge is minimal. I’m sure the folks at Diner’s Club chuckle when they see my “passwerd123” pop up when I log in to check my points. But there is a lot going on, especially since the MBA had its recent tech conference – the best in the industry. But first…

Did someone say blockchain? Spanish bank BBVA says it is the first global bank to issue a corporate loan with blockchain technology, which bank executives say cut negotiations with the borrower from “days to hours.” Efficiency, transparency and security are among the benefits of using blockchain in the corporate loan market, says Carlos Torres Vila, BBVA chief executive. And JP Morgan Chase’s Quorum blockchain technology has fintech watchers buzzing when it revealed it tested a new blockchain platform which can issue financial instruments. According to American Banker, the bank phantom-issued a $150 million, one-year, floating-rate Yankee certificate of deposit on the blockchain, in parallel with the actual issuance of the CD.

Back to the MBA. I received this note from STRATMOR CEO Lisa Springer who attended the Detroit conference. “As always, the MBA did a great job selecting the venue and speakers. Over 1300 lenders and vendors were in attendance and Garth Graham, our senior partner, opened the conference Sunday night with one of Garth’s best interactive presentations with a packed audience participating in his session, Digital Evolution. His messages were clear: Speed to closing and certainty (keeping the customer informed before they ask) are important to achieve high customer satisfaction, and high customer satisfaction is key to organic sales growth in purchase markets. Garth articulated this well in our October 2017 Insight report: Digital Tips.

“He is also great at real time polling the audience. For example, we learned that 47% of attendees at this session felt that the primary benefit of investment in digital capabilities was to drive higher borrower satisfaction, and 23% thought that faster turn time was the primary benefit. The big focus is on making the process better for the consumer, which is a significant change from two years ago when most of the focus was on regulatory compliance. Obviously, the tough market certainly is changing lenders’ attention to the consumer to gain share. 53% of attendees also felt that the primary barrier was getting their staff to change, which 27% felt it was system integration, pointing to the need to have a plan to manage change across People, Process and Technology to be effective.

“How satisfied are tech attendees with their vendors? Well, over 50% of those attending said they were NOT satisfied with their existing tech solutions. In fact, STRATMOR has a wide ranging lender survey underway currently to address the levels of satisfaction with various vendors and solutions.

“The tech show was also full of some very fast paced demos – six to eight minutes each – allowing vendors a chance to show what they offer to the attendees. This format provided lenders a chance to see a lot of new technology in a very digestible way, although the prospect of having to integrate these solutions also gave many lenders ‘in-digestion.’

“Dan Gilbert and Bill Emerson shared the Quicken story and its impact on the ‘Mortgage City’ of Detroit. Their theme was all about what it takes to create a dynamic corporate culture that attracts and retains young talent. The other message included the need to step up to the pace of change and learn how to manage the speed and pervasiveness of information – or be left behind.

“Billy Beane was the key note speaker and spoke to the importance of using the data we have, not relying just on ‘gut feelings’. STRATMOR related to this session as this message is core to everything we believe and how we work with our clients. Specifically, this exemplified the importance of measuring borrower satisfaction, where oftentimes sweeping decisions are made on very little data, and small samples of borrower sentiment are projected to the whole borrower base. Our MortgageSAT borrower satisfaction survey product is to the mortgage industry what Billy Beane was to baseball in Moneyball. We scrutinize the data and focus on the ‘sum of little changes that add up to big change.’ We were very proud to earn a Progress in Lending ‘Innovation’ award Sunday night for its contributions to the mortgage industry.

“Bottom line, we heard a ton of comments from lenders who are experiencing a mix of exciting successes, unexpected challenges, delayed projects, and outright failures in recent technology initiatives. There were plenty of new technology entrants introduced and concepts, like blockchain, creating market buzz. The MBA did a great job trying to make sense of all of this and provided an excellent venue to help the market learn about, and digest, this new information.” Thank you, Lisa!

LoanLogics’ CEO Brian Fitzpatrick addressed the question, “Is RegTech the key to digital mortgages?” “Lenders have been very busy implementing new practices and technologies to capture loan file data from the source but have not been successful in reducing their costs. According to the MBA, the average cost to originate a loan in 4Q 2018 was $8,475, the highest amount on record. What’s wrong with this picture?

“With digital mortgages, everything has been about improving the borrower experience on the front end of the transaction, but behind the scenes, lenders are clinging to manual processes and unintegrated systems that lead to a proliferation of data defects and inaccuracy. Higher loan costs are the result of that. It’s a big problem that’s only getting bigger, especially with the credit box beginning to widen and investor scrutiny on the rise.

“Digital mortgages are a process. Lenders have shown they can automate the front end of that process with fintech and have been focused on the eClosing. But they can’t validate and verify data as fast as they can collect it and from the variety of sources they collect it from—they can only do it after the fact. That’s why RegTech is needed to automate controls that span the end to end digital mortgage process. By leveraging robotics, AI and advanced workflow and rule technologies, lenders can ensure the accuracy and quality of loan file data without constantly going back to the borrower. Only then will we see origination costs decline and the true promise of digital mortgages emerge.” Thanks Brian!

Credit unions

Recently there was a court ruling on the reach of credit unions, with the American Banker’s Association claiming a victory. The ABA’s posture prompted Jeff M. to send, “Your readers should note the response from NAFCU on the same topic. It is all in how you say it, right? Struck down two vs. upheld two. The battle isn’t over. The ABA is always quick to claim victory, but in the end, they’re worrying about the wrong thing. I worry much less about our field of membership limitation than I do about the potential disrupters in the market. Bankers may want to refocus their energy.”

With refis being 37% of new apps, advice for LOs

The change in season, and lending landscape, moved Michael L. Vitali, SVP, Chief Compliance Officer, LoanLogics, to observe, “This spring brings a new home buying season. The refinance market came and went like locusts, eating everything in sight and leaving a barren waste land behind. Although the emphasis is once again on the purchase business, there are fewer homes on the market, especially at the entry level price range. First time homebuyers will find it more difficult to find an affordable home. With home prices appreciating at record levels, lenders will need to stretch the envelope to qualify borrowers, increasing risk for both.

“More programs to assist buyers, and some easing (or stretching) of credit standards will only exasperate the problem by creating more buyers for fewer homes. It’s that old supply vs. demand thing. There will be business, but lenders will need to be a little more creative to capture it. That’s where social media marketing comes in. If you’re not using it, you’re only playing half the game. Today you need more than a billboard as your website. It must be interactive, providing consumers with education and information, along with rates and products. You need to provide a complete company profile; who you are, what you do, how you do it and why.

“The more complete the picture the better chance you have to capture business. If you’re going to go there you need to go all the way. Don’t provide general info, get into the detail of your company background, the goods and services offered and why and how you help consumers realize their American Dream. We’ve come a long way so once you capture the business don’t forget loan quality and compliance.”

And Sam Heskel, president of Nadlan Valuation in Brooklyn, New York says: “The Federal Reserve has increased interest rates twice in the past three months and economists predict at least two more increases before the year’s end. The rate increases have already influenced the refi market, which has dried out considerably. Higher rates have also been a factor in another development facing the mortgage industry as a whole: in the last week alone, three national wholesale lenders laid-off employees or shut down their wholesale departments. The reasons cited were a decline in profitability and, at least in part, higher interest rates.

“In terms of the housing market, I believe that the higher rates could sideline some potential home buyers, which may bring home prices down. Of course, if that happens, it’s ultimately a good thing if you’re a buyer.

“As far as my predictions for the future, the housing market crashed in 2008, and here we are ten years later potentially facing the same pattern of rising and then plummeting home prices. In many areas, housing prices have been increasing like crazy in the past few years, so we may end up repeating the same cycle we saw ten years ago, when after the big increases in 2007 and 2008 the housing market took a plunge.

“In my business—appraisals—fewer mortgage applications means less work for appraisers; hence turn times for appraisals are better than they were two years ago. At least that is the case for the markets Nadlan covers around the country.”

Casey Cunningham with XINNIX relayed, in a bit of a sales pitch, “In your commentary you noted that, ‘LO productivity (directives to LOs to do a minimum of 3 loans per month but not telling them how to do it or give them the tools).’ At XINNIX we are seeing companies who do show the ‘how’ and provide the ‘tools’ experience an average lift of 45% in a short period of time! That is getting an LO who does 3 units to 4.2 units in 30-60 days! Imagine taking the LO who does 4 units improving to 6 units as well. So why do lenders spend insane amounts of money on recruiting bonuses instead of investing in the development of their people? I would propose that they don’t believe they can shift the production of their current LOs! I believe they haven’t met XINNIX!”

Do you speaka my language? He just smiled, and gave me a Vegemite sandwich

Last Saturday this commentary had a piece on the approach the industry is taking toward mortgage documents in languages other than English. It spurred someone to send this note. “Your preface about the various language that are now spoken in the U.S. reminded me of a recent out-patient visit to our Frederick Memorial Hospital.


“First step of course is a visit to a sound proof booth to present my orders, insurance card, ID and of course a credit card to ensure payment for services not covered by my insurance. While the lady is clicking her keyboard, I notice a desk placard that explains that the hospital offers translation services. Of course, there are three columns of virtually any language you can imagine explaining the translation services; Spanish, French, two types of Chinese, Tagalog, Vietnamese, Arabic, Korean, Russian, Haitian Creole, Urdu, Portuguese, Polish, Italian. The list included virtually all I could imagine…EXCEPT German! Odd, given that Frederick, after all, was originally a German settlement.


“I proclaimed ‘Entschuldigen Sie, warum haben Sie keinen deutschen Übersetzer?’ She replied, ‘Huh?’


“’Excuse me – why don’t you have a German translator? Is the hospital unaware of Frederick’s German roots? We even have the Schifferstadt the 1758 Brunner family home. Our Sister City is Moerzheim, Germany.’ She just looked at me.


“Should I make a public statement of outrage of the hospital not being sensitive to my native language, IF I were a native to Germany?


“NO! My Great Grand Parents who came here from the surrounds of Stuttgart Germany made it a priority to become American. They had some English abilities and never spoke German except in the home. They strove to assimilate and not set themselves apart of what SO many Europeans were trying to be…. An American. And those same people had their kids who would become what is now known as the Greatest Generation, the same kids who went back to Europe and conquered one of the great evils we have ever known.


“I find it a mystery why the people we have welcomed to our country now don’t seem to really want to be an American. Speaking and understanding the language is ESSENTIAL to fitting into a culture and a society. Expecting that society to bend and facilitate your ‘differences’, in my opinion, is selfish and self-defeating. Which, of course, make you someone who then needs assistance and support of the social systems that support the disadvantaged. Just the opinion of an old grumpy curmudgeon.”

Trivia day! What kills more humans world-wide, cows or mosquitoes? Well, mosquitoes, but here’s a site discussing animal-related human fatalities.

Visit www.robchrisman.com for more information on our industry partners, access archived commentaries, or to subscribe to the Daily Mortgage News and Commentary. If you’re interested, visit my periodic blog at the STRATMOR Group web site. The current blog is, “Amazon in the Mortgage Jungle.” If you have both the time and inclination, make a comment on what I have written, or on other comments so that folks can learn what’s going on out there from the other readers.


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Rob Chrisman