Aug. 15: FHFA’s refi price change – TILA implications, impact on risk, not everyone is complaining; Saturday Spotlight: Usherpa

For some reason the expression, “Balls to the wall” causes giggling and sidelong glances. Any student of idioms, however, can tell you that the expression came from pilots. In older aircraft, when accelerating quickly, the throttle is pushed all the way to the panel and the throttle lever (ball) actually touches the panel (wall). Plenty of brokers, branches, and originators are going “balls to the wall” in 2020, and in talking to CEOs and owners I am hearing about large numbers of originators who will clear a million dollars of income this year. The jump in refinancing was to be expected, with rates near record lows, but lots of potential buyers are out there who are tired of feeling stuck in small homes with each other or in cities where the virus can easily spread. The spread between what lenders charge borrowers and what they’re able to sell the loans for is wide, even with the new .5 FHFA refi hit. Even as early as May, Mr. Cooper, one of the industry’s biggest companies, told investors that its margins in Q2 could be 3 percent, more than triple its Q2 rate last year.

Saturday Company Spotlight

This week we highlight Usherpa, a platform for loan officers to remain connected to their clients and partners.

Describe your company (when was it founded and why, what it does). Usherpa was founded by a Loan Officer who was frustrated by his lack of repeat and refer business. Dan Harrington started Media Center at CTX Mortgage in 1995 to automate the CRM/marketing process. From the ashes of the 2008 housing market crash, Dan and Co-Founder Chris Harrington took the Media Center concept and developed Usherpa.

Armed with the industry’s most sophisticated, cloud-based CRM/Marketing Automation system, Usherpa’s Relationship Engagement Platform has helped thousands of Loan Officers stay connected with Realtor partners and clients. Usherpa’s robust data intelligence creates opportunities Loan Officers can bank on. With Usherpa, LOs develop thought leadership and become recognized as the go-to mortgage expert whom borrowers and Realtors continue to refer and do business with – regardless of market conditions. Loan Officers, Marketing Directors, and CEOs rave that Usherpa is the easiest to use system on the market.

What does Usherpa do to help elevate your employees’ growth? Our core operational structure revolves around the Entrepreneurial Operating System (EOS). EOS keeps us growth-orientated, so we can systematically concentrate on the development of employees through professional education/training, certificates, business/leadership coaching, and industry-specific seminars. Our IT Development team is very active with Microsoft Azure User Groups and Boot Camps.

Companywide, employees have access to our Learning Management System and monthly status meetings, keeping all departments apprised of the innovative advancements Usherpa continues to push to market.

Tell us how Usherpa maintains its culture in a work-from-home environment. A few of Usherpa’s Core Values are: Be Passionate. When our employees are passionate about what they do and the difference they make, it’s infectious. Our Cheers for Peers program gives employees a public forum to thank other co-works for their work. Do the right thing for the right reason. We’re focused on long-term results, not quick wins. Usherpa went to 100% telework at the start of the pandemic, providing staff with at-home offices so they could work comfortably and continue providing stellar service to members. Laughter. To maintain a joyful culture, we implemented team-bonding virtual events such as one-on-one rotating coffee breaks, Thirsty Thursday cocktail hour, Bingo, Trivia Night, and a Zoom “campfire” with s’mores!

Things you are most proud of that don’t have to do with sales. We’re proud of the tenure of our team and our customer base. We have employees who have been on our team since 1995, corporate clients that have been customers for over a decade, and individual users who have been with us for over 20 years. We are proud to report that our clients on average convert 46% more prospects, close 2x more deals, and increase their repeat business by 57%.

Fun fact about Usherpa? In 1995 our first technology was a fax machine and the databases were in Excel! We’ve come a long way since then: Usherpa’s Open REST APIs connect with 20+ FinTech services and our Relationship Engagement Platform is secured in the Microsoft Azure Cloud.

(For more information on having your firm and its charitable side featured, contact Chrisman LLC’s Anjelica Nixt.)

Director Calabria’s FHFA Price Hit: Someone Will Pay

This week all the talk was about the .5 FHFA refi price hit. But not everyone bristled this week at the FHFA price hike for refis, and one note is below. Warehouse banks are prepared for the jump in funding. Doc drawing and funding staffs will be putting in some OT. My informal poll indicates that any current locked loan, not funded and delivered by Aug 20 or 21, will be subject to this hit. Most wholesalers and lenders appear to be taking the hit to their corporate balance sheets, sparing borrowers and broker clients.

Mid-sized lenders are exposed on hundreds of millions of dollars’ worth of locked loans. These are loans that will fund, but won’t be purchased by Fannie or Freddie in time to beat the deadline, and lay them open to a several million-dollar hit. Unfortunately, there is nothing lenders can do for floating locks, nor are they inclined to, given the .5 hit. Lenders who were sailing along, earning decent margins, and restoring coffers depleted from earlier in the year, will say that they are burdened by this sudden change. This is the second time this year the agencies have made a move significantly impacting the income they thought they would earn for their locked loans.

Attorney Brian Levy, author of the Mortgage Musings blog, wrote, “The surprise decision by FHFA/GSEs to bump refi pricing by 50 bp has many companies are scrambling to find ways to minimize the hit to revenues. While there may be secondary market options, as a reminder, under TILA’s LO Comp Rule you are (currently) not allowed to charge LOs for mistakes that were reasonably foreseeable and within the LO’s control. That said, the GSE surprise announcement is clearly an unforeseen circumstance out of the LO’s control, so, under LO Comp, it appears to fall within the category of things you actually can ‘ding’ an LO for (subject to state employment law). Whether a mortgage company wants to do that and how to apply that various situations requires further legal, practical, and factual analysis. To be clear, however, I don’t see any good arguments that the GSE refi price increase is a Change of Circumstance under TRID allowing you to reprice the loan with the consumer after issuing disclosures. Lock agreements are governed by state contract law and, generally speaking, even if a lock agreement is verbal, it is still enforceable. So, you are still legally bound with any lock with a consumer as with any other lock agreement. Seek legal counsel for any specific questions on contract enforcement or LO Comp application to commission adjustments.”

MCT’s Phil Rasori analyzed the potential effect of Wednesday’s fifty basis points worsening in prices paid by Fannie Mae and Freddie Mac for most mortgage refinances. “According to data from the MCTlive! secondary marketing software platform, MCT estimates increases in borrower rates of up to 0.375%, leading to the average borrower paying as much as an additional $21,000 over the typical thirty‐year loan term. These FHFA‐directed price adjustments do more than work against the hopeful economic rebound and the original agency charters, they undermine trust and spur uncertainty at a crucial time. Who knows where the next no‐warning directive will strike? Non‐owner‐occupied loans? High loan‐to‐value? The only way lenders can protect themselves from these risks is to increase margins across the board, according to our analysis on the order of seventy‐five to one hundred basis points in total.”

Disagreeing is Ed Pinto, Director of Washington DC’s AEI Housing Center. “The Housing Lobby has described the GSEs’ imposition of a new 1/2-point market adjustment fee to offset risk on refinance loans as: ‘outrageous’, ‘a cash grab’, and ‘based on jealousy, greed, and disdain’.  Nothing could be further from reality.

“First, a few facts based on our Nowcast rate lock data from Optimal Blue. The GSEs’ share of the entire cash out refinance market is now at 90%, up from about 75% at the beginning of 2020. The GSEs’ share of the entire rate and term refinance market is now at 80%, up from about 63% at the beginning of 2020. Recently the combined volume of cash out and rate and term refinance rate locks has been more than double the level a year earlier.

“To put the new 1/2-point upfront fee in perspective, mortgage rates on refinance loans have dropped nearly 100 basis points since early January 2020. The new 1/2-point fee is equal to about 13 basis points in rate, a minor impact compared to the massive drop in rates just since early January.

“The FHA, VA, and private sector refinance shares are down because the agencies and lenders have appropriately tightened credit standards. While the GSE’ standards have also tightened, it has not been enough to slow their massive share and volume increases.

“Mortgage lending history teaches us that lending into a vacuum is dangerous and nothing indicates that more than a massive increase in share compared to ones competitors… It is worth noting that a 30-year fixed rate, fully documented 65% loan-to-value cash-out refinance loan has default proclivity under stress that is the same as a 91-95% loan-to-value purchase loans with the same metrics.  And the GSEs’ currently guarantee cash out loans up to 80% loan-to-value.

“There are many reasons refinance loans are so risky, but first and foremost is that, unlike purchase transactions, there is no arm’s length purchase price to benchmark to. Thus it is all too easy to ask: ‘What do you need the value to be?’ The new 1/2-point market adjustment fee is not only appropriate, but it would have been a dereliction of regulatory oversight not to have taken action.”

Hard Work Pays Off, Most of the Time! (Warning: Rated PG. Thank you to Spencer D. for this one.)

Every morning, the CEO of a large bank in Manhattan walks to the corner where a shoeshine is always located.

He sits on the couch, examines the Wall Street Journal, and the shoeshine gives his shoes a shiny, excellent look.

One morning the shoeshine asks the Executive Director, “Do you think the stock market is over-bought? What about the muni market?”

The Director asks in turn arrogantly, “Why are you so interested in that topic?”

“I have a million dollars in your bank,” the shoeshine says, “and I’m considering investing some of the money in the capital markets.”

“What’s your name?” asks the Director.

“John H. Smith.”

The Director arrives at the bank and asks the Manager of the Customer Department, “Do we have a client named John H. Smith?”

“Certainly” answers the Customer Service Manager. “He is a highly esteemed customer. He has a million dollars in his account.”

The Director comes out, approaches the shoeshine, and says, “Mr. Smith, I ask you this coming Monday to be the guest of honor at our board meeting and tell us the story of your life. I am sure we will have something to learn from you.”

On that Monday, at the board meeting, the Executive Director introduces him to the board members. “We all know Mr. Smith, who makes our shoes shine in the corner. But Mr. Smith is also our esteemed customer with a million dollars in his account. I invited him to tell us the story of his life. I am sure we can learn from him.”

Mr. Smith began his story.

“I came to this country fifty years ago as a young immigrant from Europe with an unpronounceable name. I got off the ship without a penny. The first thing I did was change my name to Smith. I was hungry and exhausted. I started wandering around looking for a job but to no avail. Suddenly I found a coin on the sidewalk. I bought an apple. I had two options: eat the apple and quench my hunger or start a business. I sold the apple for a dollar and bought two apples with the money. I also sold them and continued in business. 

“When I started accumulating dollars, I was able to buy a set of used brushes and shoe polish and started polishing shoes. I did not spend a penny on entertainment or clothing, I just bought bread and some cheese to survive. I saved penny by penny and after a while, I bought a new set of shoe brushes and ointments in different shades and expanded my clientele. I lived like a monk and saved penny by penny. 

“After a while, I was able to buy an armchair so that my clients could sit comfortably while cleaning their shoes, and that brought me more clients. I did not spend a penny on the joys of life. I kept saving every penny. 

“A few years ago, when the previous shoeshine on the corner decided to retire, I had already saved enough money to buy his shoeshine location at this great place.

“Finally, three months ago, my sister, who had been a hooker in Chicago, passed away and left me a million dollars.”

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, “No One is Standing Over Anyone’s Shoulder”, focused on managing remote employees. If you have the 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