Dec. 14: Letters on employee performance, HFAs, disposable income, LIBOR; HR Christmas party humor

We have one week until the Winter Solstice, after which we’ll begin seeing more sunlight every day in the Northern Hemisphere. That’s good news! But with the holidays, things are quieting down as they always do in our business. The 2019 mortgage conference season is pretty much over, and with it the sight of middle-aged mortgage bankers filling hotel gyms trying to stave off aging. But there are still issues that concern the industry, not the least of which are motivating personnel, down payment assistance programs, approving borrowers at different income levels, and the transition from LIBOR.

Personnel expectations

Companies like XINNIX do a fine job of training and equipping new originators with the skills needed in the industry, among other things. I was reminded of management’s role in improving performance:

Recently my commentary noted, “…I hope that MLOs on your staff are funding lots of loans, because if they aren’t, time to train them or let them excel elsewhere.” Personnel and the reasons for good or bad performance are complicated, but the comment prompted Bob Masur to send, “Okay, so why do so many people seem to think training is the best or (sometimes) the only solution to a performance problem? What about management’s responsibilities to set performance expectations, provide feedback, ensure needed tools and resources are available, and institute rewards and consequences?

“Training certainly has its place and value. It loses much value, however, if people don’t understand what’s expected of them, know how they’re performing against those expectations, have the tools and resources they need to do the job, and experience personal measures of success or failure. One man’s opinion that a number of factors influence performance even more than good training does.” Thank you, Bob!

Housing Finance Agencies

From Detroit Greg Zagorski sent, “Thank you again for publishing my previous email on state housing finance agency (HFA) down payment assistance programs. I believe that your readers should understand state HFA programs and all the great work they do expanding access to credit. One of the reasons I stayed at NCSHA as long as I did is that it gave me the opportunity advocate on behalf of some of the most dedicated agencies and people you’ll ever meet.

“If a lender, broker or realtor is not currently partnering with the HFAs in their markets, I strongly encourage them to take another look. HFAs have a successful track record of responsibly funding affordable loans for working families and other creditworthy borrowers who are underserved in the market. Most offer multiple loan options, which will allow originators to find the product that best suits their client.

“HFAs continue to evolve their programs to meet the critical housing needs of their states. Some examples include Minnesota Housing’s efforts to serve more minority borrowers and close one of the largest homeownership gaps in the country, for which it won NCSHA’s 2019 Award for Empowering New Buyers; a long standing initiative from North Carolina HFA that has helped over 15,000 low-income seniors stay in their homes by financing critical repairs (also a 2019 NCSHA award winner); and New Hampshire HFA partnering with Fannie Mae and other industry players to expand financing options for resident-owned manufactured housing communities.

“In short, partnering with HFAs is a sure-fire way for originators to boost production by responsibly serving low- and moderate-income consumers. You can look up more information about your HFA at NCSHA’s website.” Thank you, Greg!

Underwriting & disposable income

Brian Saltvick contributed, “Rob, as I enjoyed my morning coffee reading your commentary, I about choked with regards to the underwriter’s comments on debt to income ratio for high income earners. What they failed to realize or consider is that the cost-of-living for MOST individuals earning over $400k annually, is substantially higher than the cost of living for individuals earning just $60k.

“Don’t get me wrong, the consumer making $60k would love a new Porsche, lawn service, a boat, etc… they just can’t afford them. The $400k earner has the ability…and as human beings the American consumer has a history of living a lifestyle that is a reflection of their income. While the amount of disposable income (as a whole dollar amount) is much greater for the $400k earner, as stated, the typical American consumer lives to their means or beyond.


“The key words here are ‘typical’ and ‘most’. Underwriting guidelines are written to cover the ‘typical’ and ‘most common’ and underwriting platforms (DU, LP, and the like) use algorithms based on profiles and specific details. Regardless, the ‘outliers’ I think they are talking about are those with a substantially higher income but a frugal lifestyle. Typically they have the means to make debt ratio a nonissue with funds down from their higher reserves.


“IMHO anyone wanting to stretch qualifying, purely based on amount of disposable income (rather than a ratio), would be recommending a change tantamount to an ECOA violation. The industry already has enough alternative products for high credit score/high income and asset borrowers that stretching the conventional programs to accommodate that profile seems like a big change for a small group.”

Transition away from LIBOR

At this point nearly everyone know that the publication of LIBOR is not guaranteed beyond 2021. You’ll only be able to see the rates on the black market! Okay, just kidding. If you want some basic information, this primer is a good place to start to learn about an overview of the LIBOR transition, as well as an actionable checklist, with a focus on the proposed US alternative reference rate, Secured Overnight Financing Rate (SOFR).

The Alternative Reference Rates Committee of the Federal Reserve Bank of New York is very active researching and making recommendations regarding the SOFR, the committee’s recommended alternative to US dollar Libor. The New York Fed’s consultation on publication of SOFR averages and a SOFR index has been extended until Jan. 10.

Recall that last month both Fannie Mae and Freddie Mac published information about the LIBOR-SOFR transition, including additional information about the structure of the upcoming SOFR-based Adjustable-Rate mortgage offering and how it compares with LIBOR-based hybrid ARMs. Here is the Fannie Mae SOFR information webpage. Click to view the Freddie Mac publication.

And this week Freddie priced a new offering of Structured Pass-Through Certificates (K Certificates), which includes a class of floating rate bonds indexed to the Secured Overnight Financing Rate (SOFR). The approximately $765 million in K Certificates (K-F73 Certificates) are expected to settle on or about December 20, 2019. The K-F73 Certificates are backed by floating-rate multifamily mortgages with 10-year terms, which are currently LIBOR-based.

Freddie Mac is using K-F73 to provide support to the SOFR bond market ahead of a SOFR multifamily mortgage offering and to help ease the eventual transition away from LIBOR.

Banks are looking into whether artificial intelligence can smooth migration from Libor to another benchmark for existing contracts. AI could be useful for the switch, but much of the analysis still has to be done by humans, Linklaters partner Deepak Sitlani says.

Regional Banks Face Bumpy Road Away From Libor. Lenders fear replacement could notch outsize drops at times of economic stress.

Zombie LIBOR? The US Commodity Futures Trading Commission aims to make it easier to convert Libor swaps contracts to the Secured Overnight Financing Rate through no-action letters expected by 20 December, Chairman Heath Tarbert says. “The relief will cover amendments to existing swaps that either add a fallback provision or change the reference rate to SOFR or another risk-free rate,” Tarbert says.

But wait! The argument that the Secured Overnight Financing Rate should be the exclusive replacement for US dollar Libor is increasingly called into question. “I believe, as many do, that there is no reason why Libor, having been a singular rate, should be replaced by a singular rate,” says J. Christopher Giancarlo, former chairman of the Commodity Futures Trading Commission.

If you want to do what the “Big Boys” are doing, large global banks are transitioning away from Libor the quickest because of their access to resources, regulators and experience, according to researchers at Cadwalader, Wickersham & Taft and Sia Partners. The law firm’s survey of 75 financial firms found that while US regional banks haven’t made as much progress, they plan to specifically budget for the transition during the coming year.


The Office Christmas Party was written by Libbe HaLevy.

Subject: The Office Party

FROM: Pat Lewis, Human Resources Director

TO: Everyone

RE: Christmas Party

DATE: December 1

I’m happy to inform you that the company Christmas Party will take place on December 23, starting at noon in the banquet room at Luigi’s Open Pit Barbecue. No-host bar, but plenty of eggnog! We’ll have a small band playing traditional carols…feel free to sing along. And don’t Be surprised if our CEO shows up dressed as Santa Claus!


FROM: Pat Lewis, Human Resources Director

DATE: December 2

RE: Christmas Party

In no way was yesterday’s memo intended to exclude our Jewish employees. We recognize that Hanukkah is an important holiday which often coincides with Christmas, though unfortunately not this year. However, from now on we’re calling it our “Holiday Party.” The same policy applies to employees who are celebrating Kwanzaa at this time.

Happy now?


FROM: Pat Lewis, Human Resources Director

DATE: December 3

RE: Holiday Party

Regarding the note I received from a member of Alcoholics Anonymous requesting a non-drinking table … you didn’t sign your name. I’m happy to accommodate this request, but if I put a sign on a table that reads “AA Only” you wouldn’t be anonymous anymore. How am I supposed to handle this? Somebody?


FROM: Pat Lewis, Human Resources Director

DATE: December 7

RE: Holiday Party

What a diverse company we are! I had no idea that December 2 begins the Muslim holy month of Ramadan, which forbids eating, drinking and sex during daylight hours. There goes the party! Seriously, we can appreciate how a luncheon this time of year does not accommodate our Muslim employees’ beliefs. Perhaps Luigi’s can hold off on serving your meal until the end of the party – the days are so short this time of year – or else package everything for take-home in little foil swans. Will that work?

Meanwhile, I’ve arranged for members of Overeaters Anonymous to sit farthest from the dessert buffet and pregnant women will get the table closest to the restrooms. Did I miss anything?


FROM: Pat Lewis, Human Resources Director

DATE: December 8

RE: Holiday Party

So December 22 marks the Winter Solstice…what do you expect me to do, a tap-dance on your heads? Fire regulations at Luigi’s prohibit the burning of sage by our “earth-based Goddess-worshipping” employees, but we’ll try to accommodate your shamanic drumming circle during the band’s breaks. Okay???


FROM: Pat Lewis, Human Resources Director

Date: December 9

RE: Holiday Party

People, people, nothing sinister was intended by having our CEO dress up like Santa Claus! Even if the anagram of “Santa” does happen to be “Satan,” there is no evil connotation to our own “little man in a red suit.” It’s a tradition, folks, like sugar shock at Halloween or family feuds over the Thanksgiving turkey or broken hearts on Valentine’s Day. Could we lighten up?


FROM: Pat Lewis, Human Resources Director

DATE: December 10

RE: Holiday Party

Vegetarians!?!?!? I’ve had it with you people!!! We’re going to keep this party at Luigi’s Open Pit Barbecue whether you like it or not, so you can sit quietly at the table furthest from the “grill of death,” as you so quaintly put it, and you’ll get your freaking salad bar, including hydroponic tomatoes. But you know, they have feelings too. Tomatoes scream when you slice them. I’ve heard them scream. I’m hearing them scream right now!


FROM: Teri Bishops, Acting Human Resources Director

DATE: December 14

RE: Pat Lewis and Holiday Party

I’m sure I speak for all of us in wishing Pat Lewis a speedy recovery from her stress-related illness and I’ll continue to forward Your cards to her at the sanatorium.

In the meantime, management has decided to cancel our Holiday Party and give everyone the afternoon of the 23rd off with full pay.

We hope that this change does not offend anyone.

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, “Politics do Indeed Impact Interest Rates and Borrowers” 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.


(Market data provided in partnership with MBS Live. For free job postings and to view candidate resumes visit LenderNews. Currently there are hundreds of mortgage professionals looking for operations, secondary and management roles. For up-to-date mortgage news visit Mortgage News Daily. For archived commentaries, or to subscribe, go to Copyright 2019 Chrisman LLC. All rights reserved. Occasional paid job listings do appear. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Rob Chrisman.)


Rob Chrisman