Aug. 20: Van Halen and brown M&Ms; vendor news; compliance tidbits; being awake in the middle of the night is ok; Saturday Spotlight: Denim Social

No one can stop the tides, nor the seasons. Nor can individuals, businesses, or presidential administrations end business cycles. During 2020 and 2021 our industry helped millions upon millions of families either finance a home or save money by refinancing, last year to the tune of nearly $4 trillion in fundings. In fact, for 2022 the MBA expects over $2 trillion in originations, a very respectable year. So what is the public hearing now about us? Yesterday’s Bloomberg headline was, “U.S. Mortgage Lenders Are Starting to Go Broke.” It is definitely worth a skim, or a read, for anyone in residential lending. Fortunately, people still want to own homes, unlike… cryptocurrency. Under “the bigger they are, the harder they fall” title, television spending from large cryptocurrency companies hit a high of $84.5 million in February, timed to both sky-high prices for crypto as well as large advertising events in the Super Bowl. Times have changed, and the “crypto winter” has made those once ubiquitous ads dry up. In July, those same large crypto companies spent just $36,000 on television advertising, according to iSpot. Stay nimble and remember the sports advice, “Keep your knees bent.”

Saturday Spotlight: Denim Social

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“Successfully scale conversion optimized campaigns across all social media channels.”

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). 

Denim Social is a Software As A Service (SaaS) provider that powers social selling programs. Our platform empowers marketers, producers, associates, lenders, and more to communicate and engage on their channel of choice, leading to more meaningful customer relationships. In partnership with Denim Social, financial institutions compliantly and authentically distribute thought leadership, build trust, and deepen relationships at scale to drive business results. Our vision is to make the practice of social selling easy, compliant, and scalable.

 

Tell us about what type of volunteer work employees are encouraged to engage in, or charities your company supports, and why. 

In addition to the tremendous work individual Denim Social employees (also known as “Denimites”) do in their communities, we come together semi-annually for a service project. This year we’ve raised thousands of dollars to create supply backpacks for LifeWise STL, which provides high-impact, relationship-based programs to help individuals of all ages develop fundamental life skills. These skills include literacy, fitness and health education, financial literacy, emotional wellness, and much more.

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?

As our company grows, so do our employees. From training sessions to individual specialty certifications, we are constantly learning new skills, failing forward, and consistently improving our ways of working together to support our vision to continuously (and relentlessly) grow the company.

 

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. 

Denim Social is headquartered in St. Louis with additional locations in Des Moines, San Diego, and Austin, but we search everywhere for the best talent. Denim Social employees are trusted to exercise their expertise and own their work, which means they can work from anywhere in the world. We’re intentional about creating culture in a remote environment and bring the team together, when it makes sense, to serve our clients and plan for our future.

Things you are most proud of that don’t have to do with sales.

The past several years have been a time of transformation for Denim Social. In the heart of the pandemic in 2020, we merged two companies to create Denim Social. This allowed us to offer our customers a more robust platform and with additional investment over the past several years, we’ve significantly grown the team to include best-in-the-industry talent.

 

Fun fact about Denim Social?

The most coveted Denimite award of the year is a jar of “Doug’s Dills,” pickles grown and made by our CEO, Doug Wilber.

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

Recent moves

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In the Bay Area, Donny Isaak and Kim Mitchell have joined Golden 1 Credit Union as Production Managers for the new Walnut Creek, CA office. “Together, Donny and Kim bring a combined 48 years’ experience in the mortgage industry and have worked together as a team for the past 12 years. We are excited to have them as part of our G1 Production Team and look forward to their success in the Bay Area! ‘We partnered with Golden 1 Credit Union for many reasons, but primarily due to their culture, vision, and strategic position in today’s marketplace. Golden 1 Credit Union already feels like family, along with their superb leadership and openness to learn and grow, we are confident in the future success of this relationship.”

Vendor and third-party developments

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Agile is the mortgage industry’s MBS fintech. Bringing the mortgage capital markets into a new digital era. From lenders to dealers, Agile is the new way to quote MBS.)

How much did “X” produce last year? In which states? What is their product mix? What was their growth YoY? Where can I access this data? There are various dashboard products, but the latest is Gallus’ new data visualization tool that provides answers to such questions and much more, including multi-year trends for all market participants.

Lenders One’s longstanding mission has never been more important than today: Help members reduce costs and increase their profitability. L1 Credit (a fully operational credit reporting agency with credit, flood, and verifications tools) has a tremendous member adoption rate, offers a customizable VOE/I waterfall, connects with LOS, and saves members both time and money through automation of orders at no cost to the originator. With the L1 Verifications waterfall, you’ll get access to the top VOI/E, VOA including Equifax’s Work Number, Experian Verify, Finicity, and FormFree, with Equifax and NCS Manuals to keep your pricing low. Click here or email Tricia Migliazzo today to receive a savings review and learn what Lenders One membership benefits and networking events can do for you.

Class Valuation recently acquired Appraisal Tek (ATek), a nationwide AMC with a large footprint in the western region of the United States. This is Class Valuation’s fifth acquisition within the last few years.

MCT’s capital markets platform, MCTlive! is now integrated with Freddie Mac’s Whole Loan Purchase Advice Seller API. This API connection allows MCT Mark-to-Market and Hedge Accounting Reports to be updated with Freddie Mac purchase data directly, instead of waiting to run reports through a Loan Origination System (LOS). The integration also allows MCTlive’s Loan Commitment Tracker to automatically draw down outstanding commitments as loans are purchased by Freddie Mac

Vice Capital Markets is one of the first Freddie Mac-integrated Secondary Market Advisors (SMAs) to release an integration for Freddie Mac’s Cash Settlement Purchase Statement application programming interface (API). The API simplifies the funding reconciliation process by providing direct access to cash purchase statement data for the loans sold to Freddie Mac, enabling lenders to quickly review and export purchase advice information. Using the Cash Settlement Purchase Statement API, Vice Capital clients can access the full contract and loan level detail of each loan committed on a particular date directly through the Vice Capital client portal, leading to a faster and more accurate reconciliation process.

First American Data & Analytics, a division of First American Financial Corporation (NYSE: FAF), introduced Procision™, a new automated valuation model (AVM) suite that uses a “state-of-the-art blended ensemble modeling approach to deliver an exceptional level of accuracy to lenders and financial services clients, proptech companies, and other sophisticated consumers of real estate data. The Procision AVM suite includes three AVM solutions, each designed to suit the demands of different clients: Procision Premier is a lender-grade AVM, the Procision Power AVM can be embedded on client websites, and the Procision Direct AVM offers portfolio analysis and can be used to create targeted marketing campaigns. The suite is built on the latest technology infrastructure, which is fully scalable and enables easy integration of new data.”

Zzzzz

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I know that this has nothing to do with the future of Freddie Mac, or FHA insurance, or non-QM lending, but what the heck: sleep is important! If you want to fire up a bored group of mortgage banking types at a conference, start talking about sleep, and how no one ever has enough. And even people who go to bed at a reasonable hour and “rise and shine” at a reasonable hour are often awake for an hour or two in the middle of the night, fretting about something.

It turns out that historical evidence indicates that people in the Middle Ages were up for an hour or more in the middle of the night and thought of sleep as occurring in two segments: first sleep and second sleep. Does four hours earlier and four hours later equal eight hours of snooze time? Maybe it doesn’t matter…

Sleep duration is probably the most popular sleep-related number, but evidence is growing that sleep regularity may be just as important in some contexts. Sleep regularity can be defined a bunch of different ways, but it essentially boils down to how consistent your sleep habits are. You can have a high sleep duration and a low sleep regularity by simply sleeping eight hours a night, but starting your sleep at wildly different times each night. One reason you might not want to do that: Older individuals with irregular bedtimes were more than twice as likely to develop cardiovascular disease over five years as those with more regular bedtimes. Another study looking at the same cohort found that every one-hour increase in the standard deviation of sleep duration was associated with a 27 percent increased odds of developing metabolic syndrome. It may be that irregular sleep disrupts your body’s internal circadian clock, which governs sleep and a whole host of other things as well: immune response, metabolism, grip strength, you name it.

If you’re regularly getting less than seven hours of sleep a night, you’re 2.94 times more likely to get a cold than those sleeping eight hours or more. Researchers uncovered this by having 153 healthy volunteers record their sleep every day over a two-week baseline period, then taking them into a lab and giving them nose drops containing a rhinovirus. The ones reporting higher sleep duration during the baseline period were significantly less likely to develop a cold than those with short sleep durations.

What about when you stay up late on weekends, sleep in, and feel groggy on Monday? It’s called “Social Jet Lag.” Defined roughly as the difference between the midpoint of your sleep on workdays and the midpoint of your sleep on your days off, social jet lag is jet lag without travel. Time zone boundaries are the perfect place to study this tug-of-war, as you can have two groups of people subjected to about the same light schedule (i.e. the sun) but different social schedules (“workin’ 9-to-5”). The picture isn’t pretty for those on the western edge of time zones: Researchers looking at time zone boundaries found that having an extra hour of light at night associates with about 19 minutes fewer of sleep per night, as well as worsened health and economic measures.

Compliance answers

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Jonathan Foxx, Ph.D., MBA, Chairman & Managing Director, Lenders Compliance Group recently wrote on what constitutes discriminating through “unfair acts or practices.” Unintentional actions implicate UDAAP just as much as intentional actions. The CFPB takes the position that discrimination, both intentional and unintentional, and in connection with any financial products, constitutes an “UDAAP” under the Consumer Financial Protection Act. Dodd-Frank specifically makes it unlawful for any provider of consumer financial products, services, or service provider to engage in any unfair, deceptive, or abusive acts or practices. An abusive act or practice materially interferes with the ability of a consumer to understand a term or condition of a consumer financial product or service. Additionally, an abusive act or practice takes unreasonable advantage of (1) a lack of understanding on the part of the consumer of the material risks, costs, or conditions of the product or service, (2) the inability of the consumer to protect their interests in selecting or using a consumer financial product or service, or (3) the reasonable reliance by the consumer on the financial institution to act in the interests of the consumer.

He also provided some insight into Regulation B’s protection of existing customers. The CFPB is now doing examination and enforcement audits to see if companies provide ECOA rules to applicants and existing customers. According to the CFPB, the Equal Credit Opportunity Act (ECOA) protections against credit discrimination do not disappear when credit is extended; instead, ECOA shields existing borrowers from discrimination in all aspects of a credit arrangement. With this Advisory, the CFPB affirms the established requirements to issue adverse action notices to an existing borrower. The Bureau clarifies that Regulation B protection is afforded to borrowers after they have applied for and received credit. Lenders may not discriminate against borrowers with existing credit.

For instance, the ECOA prohibits lenders from lowering the credit limit of certain borrowers’ accounts or subjecting certain borrowers to more aggressive collections practices on a prohibited basis, such as race. ECOA’s private right of action points to supporting alleged discrimination from persons who have already received credit. Thus, an aggrieved “applicant” can bring suit against creditors who fail to comply with the ECOA or Regulation B. In effect, the history of the ECOA’s Regulation B and its judicial interpretation of an “applicant” cannot be understood to refer only to those with pending credit applications. If it were otherwise, a person whose application was denied on a prohibited basis would have no recourse under ECOA’s private right of action, which Congress intended would be the Act’s “chief enforcement tool.” [viii] Instead, the term “applicant” is not limited to those currently applying for credit.

A lesson from Van Halen on how to decide in advance for bad times.

A common mistake is that a decision once taken is done and dusted.

A decision is a bet on a set of conditions. When those conditions change, it is time to review the decision. But we often set no triggers to alert us when things go off track. We pump money into marketing a new product without a limit on the drop-off rate, we place an order for a trade without a trigger price, and so on.

How can we change course before reaching a dead-end?

We can learn from Van Halen, a rock band from the 70s and 80s who were also operations gurus.

A Van Halen concert was unlike any other in scale. In his memoir “Crazy From the Heat,” lead singer David Lee Roth talks about how their gear would be carted in nine trucks when the standard was three. The production design was high end; the prep work, back-breaking. The band lived in fear of a screw-up by venue stagehands that would cause serious injury on stage.

Because the band was always touring (just in 1984 they did over 100 concerts), they had no time to run thorough checks at each new venue. So they came up with an ingenious way to ensure things went smoothly.

Van Halen set up a tripwire.

The band demanded a bowl of M&M’s backstage, with all the brown ones removed. “There will be no brown M&M’s in the backstage area, upon pain of forfeiture of the show, with full compensation.” They hid this clause inside an encyclopedia-fat contract.

Upon arriving at a new venue, the band would go for the M&M bowl. Any sign of brown meant a line check of the entire production. If the organizers missed the clause, it was likely they missed other things more important.

A tripwire is an alarm that goes off when things change beyond what is acceptable to you. It is designed to limit exposure to risk.

A tripwire hardcodes sensible behavior in advance by setting two parameters: metric and time (‘get to X point in Y time’ = ‘if we see a brown M&M before a concert’)

We can set a tripwire for a variety of scenarios: lose an important business opportunity, attrition touches a number, or we see a certain number of patients with the same undiagnosed condition (The trigger that led to the announcement of the AIDS epidemic was a spate of five similar cases clustered between January and April 1981 in Los Angeles).

In a changing environment autopilot is our worst enemy. A tripwire is our insurance against the worst-case scenario.

(Thank you to Kris W. from Texas for this tale.)

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 titled, “Lenders are Eying Compensation and Ops Trends.” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. This newsletter is for sophisticated mortgage professionals only. There are no paid endorsements by me. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to www.robchrisman.com. Copyright 2022 Chrisman LLC. All rights reserved. Occasional paid job & product listings do appear. This report or any portion hereof may not be reprinted, sold, or redistributed without the written consent of Rob Chrisman.)