Aug. 31: Tales of football toughness; comments on the broker channel; CFPB’s new officers; a retirement letter

Okay, football season is upon us – see the joke at the bottom. And what are sports without a little deviousness? A very short clip:


Yes, broker business has declined to less than 10% of originations, which is not newsworthy in itself as it has been hovering around this area for quite some time. But there are certainly plenty of companies fighting over that 10% – although it with the withdrawal from the wholesale channel by companies such as EverBank, Wells, BofA, MetLife, the landscape has changed somewhat. The Top 10 wholesale mortgage lenders for this year have been, in order, Provident, Flagstar, Stearns Lending, United Shore, Fifth Third, US Bank, NYCB Mortgage, Plaza Home Mortgage, Union Bank, Cole Taylor, Franklin American, and SunTrust (per Inside Mortgage Finance).


And there are proponents of the broker model, although indications suggest they don’t include Congress or the CFPB. One (and no, this is not an ad) is Paul Rozo, CEO and President of PRMG, who wrote, “It seems that the CFPB’s “new rules” have rattled and unsettled our industry, and in particular, the mortgage broker.  We’re hearing word on the street from many brokers and mortgage professionals that competitors are questioning whether the CFPB may be attempting to eliminate the mortgage broker and wholesale channel altogether.  In my opinion, this feels a lot like what occurred several years ago when the first round of regulatory changes were implemented and many wholesalers spread the same panic and fear to drive the broker into their own ‘self-serving’ retail networks with “net branch” arrangements that cannibalized wholesale mortgage brokers.  As I said back then, and I say now, the Mortgage Broker and Wholesale channel must remain viable for our industry and economy to flourish, and, most importantly, to ensure the consumer’s best interests are met.


“I want to be clear on this point– the CFPB was originally designed to protect the best interest of the consumer/borrower.  If it were, in fact, attempting to eradicate the mortgage broker, then it would be in direct conflict with its objective of supporting the best interest of the consumer.  Were there bad players in the mortgage arena and specifically among so called mortgage broker professionals leading up to the crash?  Yes, but that can also be said in a broad brush stroke from as high as Wall Street down to the mortgage loan originators (MLO) and realtors.  However, the bad players are gone and only those committed to the industry, the consumer, and operating with integrity remain.  So, as stated earlier, why would the CFPB have an adverse motivation when, ironically, the mortgage broker’s true mission is to support the borrower’s best interest by “shopping” the loan for the best terms and conditions?  In its purist form, the broker creates a competitive balance not only at the consumer level, but in the secondary market where wholesalers, like PRMG, compete and remain sharp in order to capture business.  Bottom line, the mortgage broker offers the consumer the best possible options (and solutions) when choosing the right loan program while keeping the big banks and direct lenders honest— choice is key!” (Mr. Rozo’s letter goes on to describe his company’s footprint expansion, investment in IT and improving efficiencies, education, and new correspondent channel.)


Matt Ostrander from Parkside Lending writes, “There was a paragraph recently with someone bashing brokers. He says brokers are the ones always breaking the law. He also says the CFPB should focus there not on mortgage bankers that are retail focused. The constant badgering of brokers is not only unintelligent, it is ill-informed. There are tens of thousands of loan officers and brokers in the USA. All of them should be looking at the current regulatory environment as one. Many loan officers were once on their own as brokers and vice versa. They are basically the same in many regards.


“Saying one loan officer in a brokerage conducts business differently than a retail loan officer in a bank is silly. That is unless you are stating that a broker now has more direct responsibility to maintain professional licenses, training, and compliance than a retail loan officer at a large bank and also in some instances for a retail loan officer of a mortgage bank. I’m disgusted by the lameness of the empty claims made by the outsiders to the industry and with the person who wrote this lake statement to you. I’m also astonished that we have all taken the bait set by the larger banks, congress and the media and blamed essentially everything on the actions of brokers. What? “Brokers did not act alone in a vacuum. If there was falsified documentation in a file then you also need collusion by the borrowers lying on their 1003 (a federal offense), bank underwriting to somehow misunderstand income, appraised properties to always come in exactly where they needed to in value, credit departments to write guides begging for people to lie and put shareholders at risk and finally investment bankers along with credit rating agencies to package garbage loans into synthetic securities that compiled 10 equity support pieces into one offering that was triple A rated…disgusting and unethical at the very least. “Sure, the brokers (some of them) were dirt bags but to say they were and still continue to be at the center of all things evil with our industry is just too easy, to lazy and frankly too destructive to continue to ignore. I want brokers around because they keep costs lower, offer a counter balance to banks and diversify our industry. I don’t know a single person who pines to have their loan processed by a large bank retail loan officer at their local branch. “Keep going, you’ll see where the road ends. In my estimation costs have gone up dramatically for a consumer …we just don’t know it yet because rates have been historically low. Watch as rates rise, you will see the pundits asking why the fringe can’t get access to credit. By fringe I mean the self-employed and the lower income borrowers alike. QM all but put a bull’s eye on this credit profile.” Thank you Matt.


Another reader contributed, “While I embrace some of the goals by the CFPB, I am finding they don’t seem to want us or the consumer to work in a free market. The same can be said for buying a car. Just because Tony pays $3k more for his Toyota then Sam who never shopped, does that imply that the auto dealer somehow cheated one buyer and not the other? Isn’t ‘getting the best deal’ the fun of buying a home, a car, a stove etc.? Sorry, but that little tidbit got me thinking long and hard as to how illogical some of the rules have become.”


Yesterday the commentary noted how some from the CFPB obtain some high-profile positions in the private sector, and I received this note from a correspondent rep on the West Coast: “As scummy as it feels, how is the departure of any CFPB employee any different from the revolving door in Washington between congressional and White House staffs and the lobbying industry, or between the IRS and law firms that position themselves as IRS vultures – saying they can reduce your tax burden because they know the ins and outs of settling with the IRS because they have former agents on their staff? In any iteration of this, an ethical person feels the need to take a shower, and it rubs us all wrong, but is it actually illegal? (Well, except for the lobby thing in Washington – I think there’s a waiting period on that one….!)”


(Speaking of personnel, the CFPB recently announced filling several high level positions – the lending industry was hopeful that the new officers would include people who had been sourced from small business, real estate, or lending. That is not the case, although we still wish them the best. “CFPB Announces New Leadership Positions. On August 26, the CFPB announced four individuals to serve in new leadership roles at the Bureau. Cheryl Parker Rose will serve as Assistant Director for the Office of Intergovernmental Affairs, which is responsible for coordinating the CFPB’s work with other federal and state regulators, including state attorneys general. She joins the CFPB from the Bill and Melinda Gates Foundation, where she was Deputy Director of U.S. Government Relations, and before that she was Senior Advisor and Director of Intergovernmental Affairs for House Speaker Nancy Pelosi. Christopher Carroll will serve as Assistant Director and Chief Economist for the Office of Research. Dr. Carroll is an economics professor at Johns Hopkins University…also has served as a senior economist for the Council of Economic Advisors on two separate occasions, and as an economist for the Board of Governors of the Federal Reserve System. Kathleen Ryan will serve as Deputy Assistant Director for the Office of Regulations, which is responsible for drafting amendments to the CFPB’s regulations and providing guidance to supervision and enforcement staff regarding the current regulations. Ms. Ryan joins the CFPB from JPMorgan Chase, where she was Senior Regulatory Counsel. Prior to that, she was Senior Counsel in the Federal Reserve Board’s Division of Consumer and Community Affairs. Elizabeth Brennan Ellis will serve as Deputy Assistant Director for the Office of Financial Institutions and Business Liaison. Ms. Ellis has been with the CFPB since its inception and previously served as a Senior Advisor to the Chief of Staff.”)


And finally, here’s a letter from an LO who actually retired, rather than waiting for the next refi boom, to his clients and friends:


“Last month I celebrated – if celebrate may be considered the appropriate word – my 34th anniversary in the mortgage industry. It has been a long, strange trip. In July 1979 the mortgage industry was a very different world than it is today. There were no computers, not even fax machines, no automated underwriting and no ARMs (some people still out there may remember that there were Variable Interest Rate mortgages although those were very different from the ARMs we have known for a long time). 1003s, VOEs, VODs and VOMs were completed by typewriter, or by hand, and mailed to the appropriate institution. Snail mail – and credit agencies had couriers that came by mortgage company offices daily to pick up new requests for credit reports which took 3 days or so to produce and be delivered. You think it takes a long time to get a loan through today?


“Products and guidelines were much easier to learn however as there were only Conventional, FHA & VA loans which came in either 30 or 15 year flavors. Oh! Fannie and Freddie loan limits were only $87,600 (imagine a $100,000 loan being a Jumbo) and maximum DTI ratios were only 38% (California was higher than the rest of the country with the 38%).


“In July 1979 30 year rates were about 7.5% — by December they were about 11.5% — and there was no ‘rebate pricing.’ Rates continued rising through 1980 until they reached 16+%. (You think refis are scarce today?) Those high rates and low levels of mortgage business brought about the creation of many new instruments. Some of those, the intermediate ARMs we have today, survived after a period of evolution. (Darwin would be proud – survival of the fittest.)


“Finally, in 1983, rates began their steady, steep decline and, as 30 year rates reached 12%, the first of the ‘refi booms’ began. It was nearly stillborn. You think the system was overloaded in the last couple of years? There were lenders then that had loan files stacked up along their office walls about 4 feet high that had no chance of even being underwritten let alone funded.


That was followed by the second wave of “refi mania” in 1986 which extended into 1987. Pretty much a re-run of 1983 – except now 30 year rates had dipped into the mid 8% range. There was dancing in the streets with the lower rates – and much gnashing of teeth due to the constipation of the mortgage industry. There was so much business that appraisers, if you could find one who would accept your order (mortgage brokers could still contact the appraiser directly then), were quoting 6 weeks for an appraisal. (Remember, computers were still very new and digital cameras had not yet made their entrance so appraisals were very much manual labor with photos that needed to be developed and then hand pasted into the appraisal.)


“Then came 1992 and 1993: not only was that another ‘refi mania’ period, it was the introduction of ‘rebate pricing.’ The sharks smelled blood in the water. Now computers, email, fax machines and other technical innovations were available and the system was much better able to handle the demand. Then came 1994 when Alan Greenspan ‘dropped the bomb’ and created ‘nuclear winter’ for the mortgage industry. All of that and we are still nearly 20 years to go to get to today. Today we have 30 year rates in the 4% range, Dodd-Frank and the CFPB…


“If you have made it this far, you are probably wondering where all of this is leading. Well, after 34 years, I am retiring at the end of this month. I have enjoyed knowing and working with all of you although I have come to believe people in the mortgage industry must have a masochistic streak. I wish all of you I leave behind the best of luck, continued low rates and a return of Common Sense and Logic to the industry. I, also, wish you the same joy I feel as I look forward to my retirement. Thank you for your business! Bart Bartholomew”



Yes, football season is here, complete with unusual tales of toughness (Rated PG):–ncaaf.html;_ylt=Au90LnAQlwOFsMFOjp7dKA1UYsp_;_ylu=X3oDMTE4azVtdHFmBG1pdANCbG9ncyBJbmRleARwb3MDNwRzZWMDTWVkaWFCbG9nSW5kZXg-;_ylg=X3oDMTFpMm9iMzh1BGludGwDdXMEbGFuZwNlbi11cwRwc3RhaWQDBHBzdGNhdANibG9nBHB0A3NlY3Rpb25z;_ylv=3#more-26395.



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