Dec. 4: Reminders on LO comp structure; LIBOR transition & ARMs; vendor updates; Saturday Spotlight: The Work Number

It doesn’t matter if you can buy a house, or fund a loan, in a few hours. When it comes time to remodel, or build an in-law unit, from major appliances to lumber to the smallest pieces of pipe, items needed to build or fix up homes are hard to come by as the global supply chain issues drag on. What’s causing the Great Slowdown for things like lumber, appliances, paint, and furniture? “Many companies around the world, unsure of how the pandemic would affect buyer behavior, scaled back on production and laid off workers early on. Others were affected by stay-at-home orders and sick workers. But as lockdowns forced more people to remain in their houses, many folks, instead of buying less, bought more as they upgraded their homes or sought larger ones.”

Saturday Spotlight: The Work NumberⓇ from Equifax® – fast and secure verification of income and employment that is truly Instant.


In 3-5 sentences, describe your company (what it does, and how you help lenders and their consumers).

With over 25 years of verification experience, The Work Number® is the largest commercial repository for consolidated income and employment data. The platform offers lenders truly instant access to more than 125 million active records from over 2 million employers. Many mortgage lenders use The Work Number® at each stage of the loan origination process. For example, the Mortgage Ultimate solution includes the initial income verification and up to (3) additional verifications within 90 days, providing multiple VOE/VOI reports at one flat price. There are also solutions tailored specifically to the loan closing process to provide the VOE data needed within the ten-day window prior to close.


How does The Work NumberⓇ provide a better mortgage experience for consumers?

Automated access to payroll records without requiring additional action from the applicant can help reduce borrower friction. The Work Number® gives mortgage lenders valuable borrower insights in real-time, all without requiring sensitive log-in credentials from the borrower. Adding this lens to loan origination can help increase lending opportunities — and heighten fiscal focus. Above all, it can shorten the time to closing day and help more people get into homes faster.


How does The Work NumberⓇ help accelerate access to credit for marginalized communities?

As the U.S. housing market remains strong, there is an increased emphasis on removing barriers to homeownership for minority consumers and marginalized groups. The entire industry, including mortgage lenders and mortgage technology providers, is focused on working together to bring greater inclusion and insight to the mortgage lending process. By using unbiased lending technologies like The Work Number®, the industry is forging a pathway for greater populations to build generational wealth through homeownership. With seamless access to a greater scope of trusted and secure information, the journey to homeownership is a path that everyone can walk on, no matter their circumstances.

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

LO comp refresher


My cat Myrtle often catches her own protein. Not that this is a great lead in to MLOs who catch their own leads, but occasionally the question comes up, “Are LOs who have leads supplied to them be paid differently than originators who find their own?”

Jim Cameron, Senior Partner at the STRATMOR Group, replied, “The quick answer is yes, absolutely. I think of the LO compensation landscape as a continuum based on the extent to which originators generate their own leads. The highest pay goes to originators who completely generate their own leads from third party referral sources like Realtors, financial advisors, personal contacts, etc. The classic example is the Independent Mortgage Banker (IMB) loan officer. The next level down in compensation is for bank affiliated LOs who rely in whole or in part on referrals from the bank. While they may generate a percentage of their own leads, a meaningful amount of their business comes from bank referrals.

“Then you have originators who work for builder or realtor captives. In those cases the LOs do not generate any of their own leads and their compensation levels are typically lower than IMB and bank LOs. Finally, Consumer Direct originators who work in a call center receive a steady stream of leads from a variety of lead sources (e.g. lead purchases from aggregators, bank rate tables, media advertisements, etc.). CD originators’ pay is typically the lowest per transaction, but they have the potential to originate a large number of units and therefore earn a solid living.” Thank you, Jim!

Brian Levy, attorney with Katten Temple, and author of his regular Musings, weighed in. “An LO can individually negotiate their compensation and it is not uncommon for compensation agreements to distinguish between self-generated loans and company generated loans. CFPB basically defines a proxy as a factor (in this case, the source of the lead) which varies with loan terms and conditions (such as note rate, fees etc.) and which the LO has the ability to control or influence. Since the inside lead vs. self-generated loan are usually under a different pricing structure, the distinction in compensation is premised on the idea that the LO doesn’t control how a company generated lead came in the door and therefore setting up a different commission rate for such loans doesn’t violate the LO Comp Rule’s proxy test.”

LIBOR transition continues


Remember when you began hearing about the phase out of LIBOR, and 2022 seemed so far away? Sure, we’re not doing a lot of ARM loans currently, but that doesn’t mean that billions of ARMs tied to LIBOR aren’t in portfolios around the world.

The Board of Governors of the Federal Reserve System, the FDIC, the OCC, the National Credit Union Administration, and the CFPB, in conjunction with the state bank and state credit union regulators, (collectively, Agencies) recently issued a joint statement on managing the LIBOR transition. The statement emphasizes the expectation that supervised institutions with LIBOR exposure continue to progress toward an orderly transition away from LIBOR.

Buckley sent out the announced answers to “Supervision FAQs on the Transition away from LIBOR” following the announcement listed above. Among other things, the FAQs included statements regarding what qualifies as a “new contract” under the previously issued guidance, specifically regarding modifications to adjustable-rate mortgages.

HUD published an advance notice of proposed rulemaking regarding Adjustable Rate Mortgages in the Federal Register (Docket No. FR-6151-A-01), to collect public comments prior to publishing the proposed rule. The majority of ARMs insured by the Federal Housing Administration are based on the LIBOR rate index that will no longer be published after June 30, 2023. In response, HUD has begun to transition away from LIBOR interest rate index, considering a rule that would address a Secretary-approved replacement index for existing loans and provide a transition date consistent with the cessation of the LIBOR index. Additionally, HUD is considering providing a Secretary-approved replacement index for legacy ARMs tied to the LIBOR index. For a replacement index, HUD is also considering the Secured Overnight Funding Rate (SOFR) interest rate index, which would include a compatible spread adjustment to minimize the impact of the replacement. These changes impact forward and Home Equity Conversion Mortgage (HECM) programs.

Interested stakeholders are encouraged to review and provide comments on the advance notice of proposed rulemaking within the comment period, which began on October 5, 2021, and concludes on December 6, 2021. For instructions on submitting comments, stakeholders must follow the methods outlined in the Federal Register.

The CFPB joined other federal and state financial regulatory agencies in issuing a statement highlighting the risks posed by the discontinuation of LIBOR urging banks and nonbanks alike to continue their efforts to transition to alternative reference rates to mitigate consumer protection, financial, legal, and operational risks. For more information, read the CFPB press release and the Interagency Statement on Managing the LIBOR Transition.

Vendors on the move


Sure third-party providers to residential lenders wreak havoc on spellcheck software. That aside, let’s take a random look at who’s doing what.

Optifunder closed on a round of capital in November.

Guaranteed Rate selected the Reggora’s appraisal management technology to support the production of all loans requiring an appraisal. Proper Rate, a Guaranteed Rate Joint Venture, will implement Reggora’s software to streamline its appraisal process, leveraging automation and system integrations to create a faster and more enjoyable experience. Reggora’s mission is to make two-day appraisal turn times a reality. Of course, the company recognizes that achieving this reality while maintaining appraisal quality will take more than just technology.

FormFree® Founder and CEO Brent Chandler announced the availability of its AccountChek® financial data verification service within OpenClose®. The integration embeds AccountChek into OpenClose’s ConsumerAssist™ Enterprise POS and LenderAssist™ LOS, giving borrowers the freedom to electronically permission verification data with ease when applying for a mortgage loan. VOA reports are eligible for representations and warranty relief when assets are validated through Fannie Mae’s® Desktop Underwriter® validation service and Freddie Mac’s Asset and Income Modeler (AIM). Additionally, FormFree’s VOA reports can be used to leverage DU’s “positive rent payment history” feature, which is designed to extend sustainable homeownership opportunities to renters with little or no credit history, without disrupting lender workflows.

Leading digital mortgage and fulfillment solutions provider Promontory MortgagePath announced the renewal of its product endorsement by the American Bankers Association (ABA). Promontory MortgagePath combines extensive mortgage operations and compliance expertise with mortgage technology to provide efficient, cost-effective mortgage processing and fulfillment services to lenders of all sizes. Tech-enabled fulfillment solutions help its members reduce mortgage origination costs while allowing them to retain a full mortgage product suite.

Mortgage Coach announced its integration with First American Title Insurance Company which will enable lenders to incorporate title fees into custom Total Cost Analysis (TCA) presentations, providing consumers with greater insight into their closing costs.

Mortgage Coach enables lenders to provide a consultative home financing experience using digital TCA presentations that deliver accurate, actionable financial advice and compare the performance of mortgage loans over time. The integration makes it possible to import exact title fees including lenders’ title insurance, recording, Escrow service and borrower closing service fees — into TCA presentations. First Tech Credit Union (First Tech) is the first to leverage Mortgage Coach’s integration with First American Title.

LodeStar integrated with Blend ­to help streamline the origination and closing processes for clients with LodeStar Software Solutions’ rate calculator. The integration will allow mortgage lenders using the Blend platform (and their applicants) to search and compare loans with accurate rates and cost estimates included. Meridian Bank is one of the mortgage lenders that has incorporated both technologies into its mortgage process, and the integration has been a smooth process. “For us, LodeStar seamlessly integrated in our pre-qualifying process,” said Aaron Lepore, Senior Systems Analyst at Meridian Bank. “This vital tool allows us to quickly & accurately quote our customers during their home shopping.”

Guaranty Home Mortgage Corporation (GHMC) was looking for a solution to replace its outsourced services for indexing and capturing key data from loan documents,

Paradatec’s AI-Cloud solution was selected. The AI-based document classification and data extraction technology is hosted by Amazon Web Services (AWS). A client-specific URL is all that is needed to submit content to Paradatec’s AI-Cloud for processing. According to GHMC Chief Technology Officer Michael Rhoden, Paradatec had by far the fastest technology to read mortgage documents, along with the unique ability to seamlessly scale to very high volumes.

SitusAMC has published a first-of-its-kind Field Guide for mortgage industry participants looking to understand and navigate the federal landscape. The Field Guide to the Federal Government for Housing & Housing Finance provides an in-depth, professional perspective on the key influencers in Washington, D.C. and their impact on the single-family and multifamily real estate industries. It provides insight on how Housing Finance in D.C. works and gives an overview of the process to best navigate it.

Accurate Group recently announced the acquisition of eMerge Property Solutions, further enhancing and deepening the company’s nationwide broker and allowing it to further leverage its industry-leading property inspection technology to drive value for all clients. Accurate Group is accelerating its growth plan following a significant strategic investment by Novacap, a leading North American private equity firm in August. Earlier this year, Coast to Coast Title & Escrow was acquired by the company showing strong growth in both its appraisal management and title services divisions, driven by ongoing innovations to its Archer® technology platform. Learn more about Accurate Group’s next-generation Archer® appraisal management and title platform, the GroundWorks™ property inspection mobile app and the company’s market-leading alternative valuation solutions.

(Thank you to Spencer D. for this one.)

It is with the saddest heart, here in the holidays, that I pass on the following news. Please join me in remembering a great icon of the entertainment community.

The Pillsbury Doughboy died two days ago of a yeast infection, and complications from repeated pokes in the belly. He was only 56.

Doughboy is survived by his wife, Play Dough, two children, John Dough, and Jane Dough, who has one in the oven. He is also survived by his elderly father, Pop Tart (born in 1964).

Doughboy was buried in a lightly greased coffin. Dozens of celebrities turned out to pay their respects, including Mrs. Butterworth, Hungry Jack, The California Raisins, Betty Crocker, the Hostess Twinkies, and Captain Crunch. The grave site was piled high with flours.

Aunt Jemima delivered the eulogy, and lovingly described Doughboy as a man who never knew how much he was kneaded.

Doughboy rose quickly in show business, but his later life was filled with turnovers. He was not considered a very smart “cookie”, wasting much of his dough on half-baked schemes.

Despite being a little flaky at times, he still, as a crusty old man, was considered a roll model for millions.

The funeral was held at 3:50 for about 20 minutes.

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Rob Chrisman