Dec. 21: IRS clarifies Taxpayer First guidelines; letters on politics & the election, sales management

Happy Winter Solstice!

Culture and training

Last week my commentary had some information about training, and Bob Masur wrote, “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.”

Bob’s note prompted STRATMOR’s Jeff Babcock to echo, “I absolutely agree with Bob Masur’s comments on management’s responsibilities to provide basic sales management: a missing commitment in most mortgage companies. For years, I have been preaching the powerful strategic impact of effective sales management (‘effective’ being the operative word here) on raising Loan Officer productivity, but I’m sorry to report that only a few clients have made such a commitment.

“Consider the following example of a $1 billion mortgage company with an average loan balance of $230,000. If this lender’s average monthly sales productivity is 3.5 closed loans per originator, they will employ 104 loan originators. By increasing sales productivity by an average of one loan per month, production volume would increase by 29% to $1.29 billion. To accomplish the same volume increase by just adding originators, that lender would have to recruit 40 new Loan Officers (assuming the 35% average turnover) who close an average of 3.5 loans monthly during their first year at the company. While improving average sales productivity is not an easy initiative, recruiting and retaining 40 new Loan Officers is probably even harder.”

Huh? We have an election next year?

The mainstream press has been consumed with next year’s election since… the last election. With the 2020 election creeping closer and closer, it is important to understand where the candidates stand on some of the major economic policy issues such as health care, taxes, international trade and infrastructure. I received this note from someone in capital markets on the West Coast.

“Your readers should remember that the priority a candidate places on a policy position can matter as much, if not more, than the policy position itself. Candidates naturally try to offer policy proposals on every topic imaginable, but in recent years presidents have often been able to pass only a few major pieces of legislation over their time in office. President Obama was able to push through the Affordable Care Act (ACA) and Dodd-Frank, for example, but fell short on carbon pollution cap-and-trade legislation. President Trump managed to overhaul the U.S. tax code, but he has not been able to successfully push through a large-scale infrastructure plan. And neither President Obama nor President Trump (at least thus far for the latter) enacted comprehensive immigration reform.

“Additionally, what is proposed at points during the campaign and what is actually enacted are often very different things. Donald Trump’s initial 2015 campaign proposal called for a tax cut that analysts at the Tax Policy Center projected would reduce federal revenues by $9.5 trillion over ten years. A revised tax plan released by the Trump campaign closer to the election was projected by the same analysts to cut federal revenues by a smaller $6.2 trillion over ten years.

“In the end, the Joint Committee on Taxation projected that the Tax Cuts and Jobs Act would reduce federal revenues by about $1.5 trillion over ten years. That being said, a Republican presidency would likely mean more tax cuts, while a Democratic presidency would likely mean higher taxes for the wealthy and corporations. Any candidate elected is going to have to deal with the U.S. China trade war, as well as enacting or removing tariffs on Mexico and the EU. A large infrastructure package could easily be paid for with higher taxes on the wealthy, but where does this leave the funding for Medicare for All? Or cancelling all student loan debt? Or universal childcare?

“If a Democratic nominee were to make climate change their top priority, a large investment in clean energy could lead to more spending on infrastructure. But once again, this hypothetical plan would be competing for time and resources with some of the other issues already mentioned, such as health care, higher education and affordable housing. As the field continues to narrow, we should have a better idea of what the ultimate nominee might prioritize in their first two years in office. All that being said, it is unlikely a large-scale infrastructure package will be the first or second priority regardless of who the nominee is. Should a big increase in infrastructure spending take place, the most likely impetus would be an economic downturn. If the economy were to slow sharply, policymakers could turn to a mix of tax cuts and infrastructure spending to stimulate the economy, as they did during the Great Recession.

“Part of what made the 2016 election such an inflection point for financial markets and the economy was that it was the first time Republicans controlled the House of Representatives, the Senate and the White House since 2006. This unified control allowed President Trump and Republicans in Congress to pass some major legislation, such as the Tax Cuts and Jobs Act, without support from the opposition party. There are several potential outcomes for the 2020 election, and policy outlook is not just about the White House. Say Democrats win the White House but fail to win back control of the Senate, the prospects for major progressive policy goals, such as Medicare for All, dim significantly. Conversely, if one party were to win both chambers of Congress and the White House, the prospects for major legislative change would improve dramatically. Most of the major pieces of legislation in the past decade, such as the Affordable Care Act, Dodd-Frank and the Tax Cuts and Jobs Act, were passed during periods of unified government. Let’s take a quick look at all three branches.


“The campaign to be the Democratic nominee for the U.S. presidency (President Trump will assuredly win the Republican nomination unless he is unlikely impeached by the Senate) is well underway, with about two months until the Iowa caucuses, the first state to formally cast its ballot in the primary season. There are five frontrunners: Joe Biden, Bernie Sanders, Elizabeth Warren, Pete Buttigieg, and Michael Bloomberg. If nominated, the nominee will be looking for the route to 270 electoral votes necessary to win the presidency, whether that be reversing the 2016 votes of Midwestern states, or reversing the votes of Sun Belt states that have drifted a bit more blue in recent years. Presently, Republicans maintain a majority in the Senate, with a split of 53 Republicans, 45 Democrats and two Independents (that caucus with the Democrats). Thus, if the Democrats were to win the White House, they would need to net at least three Senate seats to win control of the upper chamber (when the Senate is split 50-50, the Vice President casts the deciding vote).


“The 2020 Senate map looks favorable to the Democrats. There are 23 Republican-held seats up for re-election compared to 12 Democratic-held seats, ostensibly giving the Democrats more opportunities to flip seats. However, of the 23 seats the Republicans are defending, 15 are in states that Trump won by 14 percentage points or more in 2016, a significant margin that will be difficult for the Democratic opposition to overcome. Of the remaining eight Republican seats, six are in states Trump won by at least 3.5 percentage points. While some of these states may be more within reach for the Democrats, they are still far from a slam dunk. Consider that of the four states Trump won by less than 1.5 percentage points (Michigan, Pennsylvania, Wisconsin and Florida), none have a Republican Senator running for re-election in 2020. There are only two Republican Senators up for re-election in 2020 from states won by Hillary Clinton: Cory Gardner of Colorado and Susan Collins of Maine.


“Complicating matters further, one of the 12 seats Democrats have to defend is Alabama, which ended up with a Democratic Senator after a hotly contested special election in 2017. Trump won Alabama by nearly 30 percentage points, and if Democrats were to lose this Senate seat in 2020, they would need to pick up a net four seats elsewhere to take control of the Senate, assuming they also win the White House. Analytic companies say there is about a 2/3 chance Republicans maintain control of the Senate.

“Unlike the Senate, the House of Representatives is currently controlled by the Democrats, and in 2020 Republicans will be seeking to regain the majority that they most recently held from 2017-2018. The House is comprised of 435 members, and the entire House is up for reelection every two years. At present, there are 233 Democrats, 197 Republicans, one Independent and four vacancies. The vacancies are split evenly between two previously Democrat-held seats and two Republican-held seats. Depending on whether you count these seats, Republicans need to net either 19 or 21 seats in the House to gain the 218 seats needed for a majority. While this is certainly doable (Democrats picked up a net 40 seats in the 2018 midterms), the net change in House seats is usually smaller in presidential election years than it is in midterms. The average net change in House seats over the last six presidential elections is seven, and majority control of the House of Representatives has not switched parties in a presidential election year since 1952. Analytic companies have a 3/4 implied probability of Democrats maintaining control of the House of Representatives.” Thank you, capital markets person!

“The income tax has made more liars out of the American people than golf has.”

At the end of this week the Internal Revenue Service (IRS) posted a clarification regarding the effective date of the new taxpayer consent and disclosure requirements needed to obtain and share IRS tax transcript information with investors, servicers and due diligence firms.

The Mortgage Bankers Association spread the word that the clarification notes that Section 2202 of Taxpayer First Act “applies only to disclosures made by the Internal Revenue Service after December 28, 2019, and any subsequent redisclosures and uses of such information disclosed by the Internal Revenue Service after December 28, 2019.” With this clarification, seasoned loans and loans in the pipeline with transcript information received from the IRS prior to December 28 are not covered by the new consent requirement.

The MBA expects the GSEs will update their published guidance to reflect this IRS clarification. “This reflects MBA’s efforts (working with the IRS, FHFA and the GSEs) to obtain clarification ahead of the December 28 effective date and before the holiday break, that addresses market uncertainty about whether the new consent requirement could impact seasoned loans sales and loans in the pipeline. MISMO, which worked to develop consent language that would meet the requirements of Section 2202, has updated its FAQs page to reflect this much-needed IRS clarification. For more information, please contact Fran Mordi at (202) 557-2860 or Rick Hill at (202) 557-2718.”

(Thanks to Salt Lake City’s Jeff W. for this gem.)

In honor of a cold morning here in Salt Lake City that reminds me of the upcoming holiday season, I present this bit of trivia to you. 

Do you know why they put up a Christmas Tree in Rockefeller Center?  When I was a green loan officer, still new to the business, I overheard some co-workers talking about watching the lighting of the tree in Rockefeller Center. As a young single man, I didn’t watch it so I had a few questions. 

An underwriter in my office named Noel told me that around the time of the Great Depression people living in the big city were pining for reminders of better times and a more rural holiday season. A columnist at the Times (I think is name was North) took a poll to find out what people were wishing for to brighten the city’s mood and a giant Christmas tree was the winner. Sounded legit to me but sadly, it turns out, my co-workers were only toying with me. They said only a real sap wood believe a cheesy story like that. I spent the morning ad mitten they pulled the wool over my eyes. I was needled about my nativity (or is it naivete?) by everyone in my branch. I’d rather lose a limb than go through that again! 

The actual truth about the tree was that the building’s owners just wanted something to spruce up the area and give it more light in the dark winter evenings. It is really no different than a new homeowner growing a few tulips from bulbs or some other ornamental plants to brighten their homes during the holidays. 

Of course, I can’t take credit for this interesting tidbit. I have to bough to Holly, a nice processor I work with, who shared this with me. Boy, I’d like to catch her under the mistletoe at the company party! To put a bow on this, the first year they put up the tree was 1931. Well, as they say in Tinsel Town, that’s a wrap. I hope this fact with help keep spirits bright. Have a treeific day. 

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.


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Rob Chrisman