Aug. 12: Notes on mining HMDA data, MID, cyber security – mortgage case study, inside Wells Fargo’s cyber war room

“Rob – Lots of people think that ‘locked and loaded’ is an antagonistic thing to say in a nightmarish situation, and that all the saber rattling between the United States and North Korea has no upside. They’re wrong. Plane tickets to Guam are really cheap now, and it is a fine place to visit.” Good to know that this note, from the capital markets side of the business, suggests “trading desk humor” is going strong.


Yes, HMDA will change starting January 1. Despite some groups objecting to pieces of it, at this point I have not heard of any change to that date.

“Rob, is there any way of knowing how many non-bank mortgage companies there are in the USA?” The MBA does a fine job of analyzing data of all types. Remember that we only have 2015’s; 2016’s HMDA data comes out next month, courtesy of the CFPB. The MBA’s Mike Fratantoni reports that there were 6,900 total HMDA reporters in the 2015 data. Of that, 861 non-bank originators reported HMDA data in 2015. If, on average, less than 20 companies per state seems light, you can dig into the data yourself:

Richey May also offers a fine view of the latest HMDA information (2015) at this site – just page down once or twice.

The mortgage interest deduction

Given the talk about budgets and taxes, talk of the viability and practicality of the mortgage interest deduction is back in the news. NAR has said “There is no way we will allow any changes to that.” But it is still being discussed in terms of reducing it to help the budget.

From California Ed W. writes, “This is hilarious. These people cannot figure Trump out. They are losing their mind because of the mortgage interest deduction. With Trump, EVERYTHING is a negotiation and that means everything is on the table and there are no sacred cows. We ought to be focusing on the idiots increasing the basic deduction, that is far more dangerous to the housing industry because it dilutes the benefit of buying. Remember, the nationwide median house price is still in a spot where if you drive up the basic deduction, with low interest rates you could see some folks having little or no benefit from buying.

“It seems like the opinion leaders only care about the higher cost areas on the coasts rather than the entire country and that right there is part of the reason Trump won the election. His message resonated with the hard working, God fearing folks in the heartland that, make stuff, grow stuff, and mine stuff, as opposed to the coast dwellers who mostly just consume. If you start with everything on the table, that’s a negotiation. If you start and immediately set aside sacred cows, you are simply nibbling at the edges.”

Stephen G. sent, “Hey Rob, there is likely another element to the impact of the mortgage interest deduction. I must assume that this write-off is imputed into the qualifying ratios. If that’s true, it would follow that the acceptable DTI would be reduced should that deduction be eliminated. So regardless of whether it’s an incentive to buyers, it could adversely affect their ability to qualify.”

From Canada (yes, worldwide readership!) Bob W. did a little research and relayed, “Rob, I don’t think homeownership will drop at all if the deduction is taken away. People will adjust. All one must do is take a look at the rest of the world’s mortgages & ownership.

Check out this site showing home ownership out and the US is # 41 in the world. Canada is 35, Australia is 36, and Great Britain is 42. For sure these 3 don’t allow home interest deductions. Most folks in the business will be surprised when you show them the numbers or this site. This is a list of countries by home ownership rate, the ratio of owner-occupied units to total residential units in a specified area.

“About 30% of all homes in the US are mortgage free. At today’s low rates, the deduction is less than when rates were double digit. I think Sweden lowered the length of time to just under a hundred years or so, compared to our 30.

“Here in Canada, folks purchase a home to own a piece of the rock and pride of ownership. Interest isn’t deductible as I think England, Australia and most of the world. Congress and HUD certainly contributed to the financial crisis by thinking everyone should be a homeowner. Most folks in the states don’t even make good tenants, much less homeowners. I babysit folks all the time about their credit, and how to be mortgage free by the time they are my age. But, most folks, at least in California, think they will have a car and mortgage payment for the rest of their lives, which is very sad.  I tell my borrowers, and anyone that will listen, that if they can’t pay all their credit cards in full every month, they are living beyond their ability.

“But, thank God for fixed loans because they are the ones I refinance all the time and some have done it 15 + times since I’ve been in the business. That is one reason I sell no or low-cost loans because it takes too long to recoup the expense, and most of the cost isn’t deductible, but a little high interest is…at least 48 – 70 months most of the time. 

“The banks are run much better here in Canada, and there are very few foreclosures. If one defaults on their mortgage, the borrower is still responsible and the bank has certain rights not present in the United States to claim some personal property.

“The goal is to be mortgage free and tens of millions probably are, and I’m glad to be one of them. One is much better off putting what they may pay in interest in the stock market. I personally know Realtors as well as mortgage folks that make $500K to over a million, but they spend $1.1, and they are still broke and there are a lot of bald tires on BMWs, etc.”

Record keeping for lenders

Last Saturday I had a note about compliance and record keeping. The piece prompted attorney Steve Lovejoy with Shumaker Williams to send, “It is technically correct that TILA generally requires a two-year record retention. But anyone in the mortgage business should know that TILA requires retention of records relating to credit secured by real property for THREE (3) years, and the Closing Disclosure for FIVE (5) years. Also, evidence concerning Loan Originator compensation must be retained for three years. 

(c) Records related to certain requirements for mortgage loans—(1) Records related to requirements for loans secured by real property—(i) General rule. Except as provided under paragraph (c)(1)(ii) of this section, a creditor shall retain evidence of compliance with the requirements of §1026.19(e) and (f) for three years after the later of the date of consummation, the date disclosures are required to be made, or the date the action is required to be taken.

(ii) Closing disclosures. (A) A creditor shall retain each completed disclosure required under §1026.19(f)(1)(i) or (f)(4)(i), and all documents related to such disclosures, for five years after consummation, notwithstanding paragraph (c)(1)(ii)(B) of this section.

(2) Records related to requirements for loan originator compensation. Notwithstanding paragraph (a) of this section, for transactions subject to §1026.36:

(i) A creditor shall maintain records sufficient to evidence all compensation it pays to a loan originator, as defined in §1026.36(a)(1), and the compensation agreement that governs those payments for three years after the date of payment.

(ii) A loan originator organization, as defined in §1026.36(a)(1)(iii), shall maintain records sufficient to evidence all compensation it receives from a creditor, a consumer, or another person; all compensation it pays to any individual loan originator, as defined in §1026.36(a)(1)(ii); and the compensation agreement that governs each such receipt or payment, for three years after the date of each such receipt or payment.

Excerpts from 12 C.F.R. § 1026.25.”

Thank you, Steve.

It’s a cyber security jungle out there; all roads lead to lawyers

DC couple Sean Smith and Erin Wrona wired $1.57 million to their title company ahead of closing on a five-bedroom home, only to discover that the funds never made it to escrow. The title company says the incident stems from “what appears to be a cybercrime attack.”

McDermott Will & Emery litigators Jennifer Routh and Michael Nadel have filed a lawsuit on behalf of the couple against DC-based Federal Title & Escrow, alleging that the title company either conspired to defraud them or was so negligent in its online security protocols that it all but allowed the money to be stolen.

“After hiring a reputable closing company to assist with the transaction, and following their directions to wire the funds, no buyer would ever expect to show up to closing and learn that the title company claimed they never received their money. But that’s exactly what happened here, and we are seeking accountability from whomever is responsible and to recover our clients’ money,” says Ms. Routh.

In the lawsuit, the couple is asking not just for the funds they lost, but also for about $5 million for an alleged violation of RICO — the Racketeer Influenced and Corrupt Organizations Act, the law best known for its use against the mob — plus punitive damages and attorneys’ fees. A copy of the lawsuit, filed in the US District Court for the District of Columbia, can be found here. Federal Title denies it had anything to do with the money disappearing and said the allegations in the complaint are false.

On a larger scale, a group of Senators, including Mark Warner, Cory Gardner, Ron Wyden, and Steve Daines, are proposing the “Internet of Things Cybersecurity Improvement Act.” The legislation would require all vendors who sell devices to federal government agencies to supply IoT devices that are patchable, without known vulnerabilities, rely on standard protocols, and do not contain hard-coded passwords.

The Securities and Exchange Commission has issued a risk alert based on shortcomings identified during 75 cybersecurity exams of advisory firms. Some firms had software patches that remained uninstalled, and less than two-thirds of firms had policies for notifying clients of data breaches.

The American Bankers Association (ABA) reports that Federal financial-services regulators were asked to better coordinate their cybersecurity regulations in a bipartisan letter sent by legislators to five agencies last week. “Coordination and harmonization amongst regulators are necessary to ensure that financial institutions can direct their human and financial cybersecurity resources to identify and prevent attacks,” the legislators wrote.

A cybersecurity war room? Wells Fargo and other major banks are using virtual environments called “cyber ranges,” where actual cyberattacks are conducted on replicas of the company’s IT systems. SIFMA is also said to be tapping into the cyber range concept for this year’s Quantum Dawn simulation.

A firm’s cybersecurity strategy depends upon fully monitoring and responding to a diverse threat landscape — but this is no easy feat, with daily projects and all. Although one has to subscribe to read them, here are 7 tips to make a cyberattack comeback. Let’s hope you never need them.

Son: “’Mum, when I was on the bus with Dad this morning, he told me to give up my seat to a lady.”

Mum: “Well, you have done the right thing.”

Son: “But mum, I was sitting on Daddy’s lap.”

A newly married man asked his wife, “Would you have married me if my father hadn’t left me a fortune?”

Honey,” the woman replied sweetly, “I’d have married you, NO MATTER WHO LEFT YOU A FORTUNE!”

A wife asked her husband: “What do you like most in me, my pretty face or my sexy body?”

He looked at her from head to toe and replied: “I like your sense of humor!”

Visit 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, “Does Everyone Want a Job?” 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