Feb. 11: CHLA on IMB legal rights; MBA on LLPA changes; recession primer; vendor news; Saturday Spotlight: First Family Funding, LLC

Sending out a free commentary six days a week has its economic challenges. So, I took a part time job crushing cans for recycling. I hate it. It’s just…. Soda pressing. Puns aside, what has been depressing in the last several months, although it has slowed considerably, is the reduction in the number of people in the mortgage business, either through attrition, layoffs & cutbacks, or retirements. The latest example comes from JPMorgan Chase. What instead should make headlines are companies that are growing and hiring. (By the way, if anyone is out of a job, you can post your resume here for free and employers can view them for several months for a nominal $75 fee.) Besides employee matters, there continue to be issues that the entire industry faces on a daily basis. These include interest rates and the economy, compliance, investor and agency pricing changes, and a lack of available home inventory for potential buyers to buy, especially in the “starter home” price range. Let’s take a look at some of these.

Saturday Spotlight: Family First Funding, LLC 


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).

Family First Funding, LLC was founded in July 2011 in Toms River, NJ, with a clear mission: to be a trusted advisor to mortgage and real estate consumers. To this day, the company continues to provide consumers with relevant and up-to-date information so they can make informed financial decisions. Over the years, Family First has experienced steady growth in various markets.

At the end of 2022, the company welcomed industry veteran Fobby Naghmi to start a new brand, Homecomings Mortgage & Equity. These partnerships are set to drive further organic growth for the company in its target markets.

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

Habitat for Humanity build days are highly encouraged for all employees at Family First. These hands-on experiences offer a unique opportunity for the team to connect with their community and make a tangible impact on people’s lives. In addition, the personal connections formed during these events are invaluable and help deepen the team’s sense of community.

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? 

A partnership was formed with Jeff Lobb, the founder and CEO of SparkTank Media, and Family First to provide valuable coaching to real estate agents. This partnership has enabled Family First’s loan originators to establish solid, long-lasting relationships with these agents.

Additionally, the company regularly holds virtual training sessions, known as the “Tuesday Sales Call,” to provide its sales staff with training on various programs, investors, best practices, and more. Family First is dedicated to helping its loan officers improve and enhance their skills.

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.

Family First’s forward-thinking mindset is evident in its early adoption of technology, enabling its team to work from home. This investment paid off when the need for remote work arose due to the pandemic, as the transition was smooth and seamless. The company continues to prioritize hiring highly qualified mortgage professionals, regardless of their location or preference for remote work. Family First is always looking for ways to improve its processes and technology to support a flexible work environment.

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

Seeing the teamwork with Habitat for Humanity is something that CEO Gabe Gillen is particularly proud of most of. He’s inspired by the dedication and commitment he has seen by his team, as well as the community’s appreciation of their work.

Fun fact about Family First Funding

Founders Gabe and Neusa Gillen were inspired by an article in a parenting magazine that emphasized the importance of putting family first before work. When it came time to put a name to the mortgage company they were forming, they went with Family First Funding.

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

Snippets from the compliance and legal world


Scott Olson, Executive Director of the Community Home Lenders of America (CHLA), and the CHLA sent the first of two comment letters they plan on sending, asking for an exemption for smaller IMBs from a requirement to submit form contracts that limit legal rights. “There is an argument that all IMBs merit such an exemption, because Dodd-Frank prohibits arbitration and other actions limiting consumer legal rights on mortgage loans. But the CHLA letter outlined how new regulations like this create a disproportionate burden on smaller IMBs in arguing at least for a targeted exemption.

“The CHLA supports the objectives cited in the Bureau’s press release of increasing public awareness of terms and conditions in form contracts that restrict consumers’ rights. We also understand why the Bureau would want to establish this requirement for the wide range of non-bank financial firms and products that are subject to few federal consumer protection laws and have little federal or state regulatory supervision.”

“However, we see no real consumer benefit of imposing this requirement on mortgage lender-servicers, since a large number of federal consumer protections already exist that cannot be waived by contract – including a ban on arbitration and other actions limiting consumer legal rights.”

Did you know that in addition to mortgage servicers needing to perform Servicing Quality Control (QC) reviews on the FNMA, FHLMC, and GNMA loans that they, or their sub-servicer, service, but are also required to perform Servicing QC on portfolio loans?

MQMR recently wrote that the Consumer Financial Protection Bureau (CFPB) describes the management and audit functions it expects of mortgage servicers. Residential mortgage servicers must ensure that the loans in their portfolio are serviced compliantly, without creating undue risks of harm to consumers. The CFPB’s Compliance Management Review (CMR) Examination Procedures specifically provide the details.

Additionally, part of what the CFPB requires for an effective compliance management system (CMS) is monitoring and/or audit. The CFPB indicated that examiners should evaluate monitoring and audit programs to ensure they are commensurate with an institution’s size, complexity, and risk profile. Although mortgage servicers may maintain some deference with regard to their portfolio loan servicing QC function, the requirement to maintain compliance certainly extends to servicing of these loans. The expectation is that a servicer will both (i) identify issues and (ii) implement corrective action measures. If servicers are not performing QC or loan file auditing on portfolio loans, they may not adequately identify and correct issues, which may result in harm to consumers.

The continuing saga of the FHFA loan level price adjustments


A letter was sent by the MBA to the FHFA (overseer of Freddie and Fannie) that expresses concerns regarding the recently announced changes to the GSEs’ loan-level price adjustments (LLPAs), particularly the addition of an LLPA based on debt-to-income ratio (DTI).

In the letter to Director Sandra Thompson, MBA reiterates initial concerns about “the unfortunate timing of the new fees, coming at the peak of the spring homebuying season (May 1, 2023), which could undermine the housing market’s recovery amidst higher mortgage rates. The letter also highlights major issues raised by members that could result from the newly added LLPA tied to a DTI ratio. The new LLPA will likely mean multiple changes to a borrower’s pricing throughout the loan application process, which could cause operational and system issues, compliance implications related to TILA-RESPA Integrated Disclosures (TRID), compromised borrower trust, and challenges during post-closing quality control activities.

“The MBA believes the DTI-based LLPA is unworkable and should be removed. It is unclear if FHFA considered how often both monthly income and debt payments change during the loan process, and how complex it will be to provide an accurate rate to borrowers given this addition to the GSEs’ pricing framework.” Stay tuned!

A primer on recessions


Sure, rates go down when the economy slows (less demand for borrowing drives down the price of credit) but other things happen. And of course, we don’t know if a recession is even going to happen, or how serious it might be. With that in mind…

A while back Brent Nyitray wrote, “If we hit a recession, you know what is going to take a hit? Servicing values. The first shoe to drop will be rising delinquency rates, and then the second will be falling long-term rates as markets anticipate the Fed taking its foot off the brakes. Any servicer or lender specializing in low quality FHA loans remember: Since there are no LLPAs in GNMA securitization, the gain on sale margins for a low FICO FHA can be huge. But there is a catch. GNMA servicing rules are exceptionally harsh regarding advances and modifications. Some lenders never fully recover servicing advances on GNMA loans.”

At some point those predicting a recession will be right, just as predicting an economic expansion will eventually be correct. Economies function in cycles, regardless of administration or foreign policy. And the “old” definition of a recession being two quarters of negative GDP, while simple and easy to understand, is stale and not accurate. And an inverted yield curve does not always predict a recession. Let’s take a look.

Although as we wrap up January of 2023 inflation has come down, it remains too strong for everyone’s liking, including the Fed’s. The Fed thinks that there is significant underlying momentum in the domestic economy due to advances in household spending and business fixed investment combined with the further tightening of labor market conditions. Fiscal policy is intended to act as a natural drag on the economy while the supply chain issues get worked out, and a few members noted that there were signs that the pandemic-related strains on labor supply were easing.

Your neighbor, or some “expert” on TV, or a consultant, does not define a recession. The National Bureau of Economic Research (NBER) has the responsibility of determining when a recession begins and when it ends. More specifically, it is the Business Cycle Dating Committee within the NBER that decides. Forget “a recession occurs any time you have two consecutive quarters of negative Gross Domestic Product (GDP) growth,” or an inverted yield curve. According to the NBER, “A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators like real GDP, industrial production, and wholesale-retail sales. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”

Know that the NBER looks at multiple factors when determining whether or not we are in a recession. But because “a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity… the two most reliable comprehensive estimates of aggregate domestic production are normally the quarterly estimate of real Gross Domestic Product and the quarterly estimate of real Gross Domestic Income, both produced by the Bureau of Economic Analysis.”

And looking at employment, NBER’s Business Cycle Dating Committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment.

Sure a recession means a slowdown in economic activity, which also typically leads to lower rates. Loan officers should know that there is no single way to predict how and when a recession will occur since economists assess several metrics to determine whether a recession is imminent or is already taking place. NBER aside, according to many economists there are some generally accepted predictors that when they occur together may point to a possible recession. Leading economic indicators (the ISM Purchasing Managers Index, the Conference Board Leading Economic Index, and the OECD Composite Leading Indicator) are watched, as is the Treasury yield curve.

Officially published data series from various government agencies that represent key sectors of the economy, such as housing stats and capital goods new orders data published by the U.S. Census, are also monitored. Changes in these data may slightly lead or move simultaneously with the onset of recession, in part because they are used to calculate the components of GDP, which will ultimately be used to define when a recession begins. Last are lagging indicators that can be used to confirm an economy’s shift into recession after it has begun, such as a rise in unemployment rates.

From Nevada, Keith sent, “Can you give me the official Fed reasoning why more Fed rate hikes will help solve inflation? Credit card debt has climbed steeply, an indicator that the population is feeling the pinch. Mortgage rates would remain elevated, and essentially destroy the housing market because of affordability. The equity drawdown will no longer be attractive except to those in dire need. Increasing supply and material costs will impact future hirings. “Everyone will continue to see the net value of their paychecks diminish. People have to live so they will continue to buy food, gas, and pay their energy bills. It doesn’t reduce the amount of money in the economy. It just means people are buying less items with the same money. It will have zero effect on inflation. In fact, it will propel us more quickly into a recession.”

Vendor/third-party provider: random news from around the biz


“We are pleased to introduce the next generation of Real Estate Valuation and the Appraisal Process into the market, allowing lenders to bring their valuation workflow in-house. Unlike an AMC, our business model is singular and focuses solely on the success of your lending business and your business alone. We accomplish this by partnering and administering over your own software platform allowing each branch or loan officer the ability to have their own relationships with an appraisal staff for each market area they are lending in state by state. This is 100% compliant with all state regulations. No longer will a lender have to rely on the transactional relationships they’ve established with one or multiple AMCs. Our universal appraisal software platform allows lenders to bring all of their valuation workflow in-house with more control, lower appraisal costs, better service, happier clients, borrowers, and appraisers. (Please contact Rob Chrisman to forward your note of interest in hearing more about this.)”

MonitorBase, a mortgage fintech company that monitors prescreened credit information and real-time behavioral data to alert lenders when one of their contacts is in the market to purchase or refinance a home, has launched instant credit inquiry alerts for their mortgage lender clients as part of their platform. The new feature alerts loan officers within minutes when a contact in their database has a mortgage credit pull with a competitor and instantly generates a credit offer email without the loan officer needing to take additional action.

Industry Leading Non-QM lender Logan Finance announced the successful implementation of the OptifiNow TPO, a CRM platform designed for wholesale lenders. OptifiNow TPO provided Logan Finance with the ability to rapidly scale their wholesale team and quickly roll out mass marketing campaigns to brokers using innovative sales and marketing management tools. “We are already seeing a positive impact of OptifiNow TPO on our sales and marketing efforts,” said Bobby Love, COO at Logan Finance. Partnering with wholesale lenders for years built a deep understanding of their needs that resulted in the creation of OptifiNow TPO. Logan Finance chose OptifiNow TPO because they saw that the CRM could help them grow their Non-QM wholesale and correspondent channels quickly.

HUD finalized a new rule allowing private flood insurance to be written on FHA insured loans. While mostly following the Joint Rule, there are exceptions. OSC Insurance Services posted a Compliance Bulletin Special Report that breaks down important requirements, provisions, and rule implementations key to this new rule, which goes into effect on December 21, 2022. Additionally, the bulletin includes a helpful Private Flood Insurance Requirements Matrix.

Agile, the electronic RFQ platform exclusively licensed by MCT, announced that Multi-Bank Securities, Inc. (MBS), a veteran-owned, fixed-income securities broker-dealer, has joined Agile’s broker-dealer network. Agile clients already approved with MBS will automatically see them added as an option for individual and competitive trading, and clients interested in an introduction can contact Agile or work with their MBS representative. View Agile’s Press Release for details.

Your tongue is the only muscle in your body that is attached at only one end.

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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 2023 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.)


Rob Chrisman