Feb. 14: Notes on LO compensation for bond programs, meeting processing deadlines; a touching story of love and respect

Lots going on, but fewer letters this Saturday – I wanted to save room for a long heartfelt story at the end.

Regarding the renewed talk of modification programs by Mel Watt, I received this from Northern California. “Here is my idea on how to help homeowners who are underwater: just modify their loans to a 50 year mortgage, this will help them reduce their payment, and keep them in the home. When the market finally turns, allow them a Streamline or No Cost refinance.” Maybe that’s too easy…

And this on the CFPB lack of attention to details: “What has the CFPB cost in budget, research, website, and building improvements so far, $500 million, or more? Let’s see what we get for our money. Take a look on their website at the old vs. new RESPA/TILA integration forms. On the new Closing Disclosure example form the date issued is the same date as the closing date (upper left corner). Hey, boys and girls in Washington- the Disclosure is supposed to be issued 3 days before the Closing! Hello?!? Jeez, you can’t make this stuff up!” Signed, “Anonymous, for fear of a hefty fine…”

(Along those lines, Donna Beinfeld writes, “Payoff statements are required to be sent within seven business days after the servicer receives a written request. However, there are exceptions which could extend the time frame beyond seven days. Dodd-Frank Act section 1464(b) established TILA section 129G, which requires that a creditor or servicer send an accurate payoff balance to the consumer within a reasonable time, but in no case more than seven business days, after the receipt of a written request for such balance from or on behalf of the consumer.”)

Speaking of a focus on dates, and how LOs can be distracted from actually helping their clients, from the Rocky Mountain Region comes, “Over the past several years my biggest frustration and concern has been with the wholesale and retail lenders I use not caring about or paying attention to the purchase contract deadlines or even lock expirations. Consider that I, as the loan officer, have no authority over anyone other than myself and an employee if I have one, but I am on the hook in the eyes of my borrower, their realtor, and the selling agent to meet all the contract dates in the purchase contract pertaining to the loan. I take these dates very serious, and I commit with every loan transaction to meet them or beat them to protect my borrower and keep them from falling out of contract.  But the second my processor turns the loan in for underwriting I am at the mercy of the company I’ve selected to do the same.  Unfortunately for me and everyone else, I find that these companies care more about their internal processes and policies and protecting the feelings of their underwriters and other internal team members than they do the contract, their clients, the borrowers, the realtors, or anyone else on the hook to deliver. I understand that they have to have policies and processes, and that LOs have to turn files in quickly. But time and time again, even with ample time to complete, these lenders are still missing appraisal deadlines, title deadlines, loan condition deadlines, closing deadlines and funding deadlines. They cause the parties to have to repeatedly execute extensions. They cause extreme stress, and in some cases they can cause borrowers to lose thousands of dollars in earnest funds and the property they wanted (that’s not happened to me thankfully) if the seller refuses to extend because they have a stronger offer in line. That’s becoming common in our hot markets.

“The industry has been restructured so everyone can go after the loan officer for liability, however no one is talking about any liability falling on the lender who has some control over whether that purchase agreement’s deadlines are met or missed. They can take their sweet time sending out an appraiser, approving the loan, signing off on conditions, title docs and the appraisal report, and they can drag their feet on sending over figures, docs and finally the funds. I’ve seen it take 3 business days to sign off on one single document and voila!  The HUD just expired.  Or we’re expecting a CTC any minute and instead we get ‘sorry, your bank statement expires tomorrow’ even though they’ve had that statement for 2 months.  What!?!  Or our favorite: ‘I don’t see that document in the file’, even though you’ve uploaded it 3 times. No matter how much I protest, complain, push, demand or otherwise pressure the lender to consider the damage done by missing these dates, they may act like they care, but they still don’t speed up their delivery. They give lip service that they are working hard to get things done, but they still come up with last minute requests that should have been included in the first round of conditions (sloppy), and then they are late to clear the loan to close and everyone is scrambling to figure out how to keep the borrower in contract.  It’s not just one or two lenders, it’s a lot of them, and it seems to be more common with lenders that centralize everything so they have to handle files on an ‘as received’ basis. A more decentralized unit could be capable of paying closer attention to which loans need to close first and prioritizing them so they don’t become a crises (like in the good old days). I understand there are a lot of lenders that are really fast, or they say they are.  But there is really no accountability required of them.  I can get in a lot of hot water as an LO for a lot of reasons, but what about lenders that take unreasonable amounts of time to finish up a CTC or to release figures or to order the wire? I am tired of taking the beating for their delays, and losing repeat and future business for something I can’t control, but the lender can. Whether everyone’s reaction to this by taking it out on me is reasonable or not, it’s still a beating.”

Bruce from Oklahoma writes, “Hello Rob – I’m enjoying the conversation on the LO Compensation for Bond Programs that you’ve written of the last few days. Has anyone looked at the CFPB’s Small Entity Compliance Guide on the Loan Originator Rule about ‘proxies for transaction terms’?  Specifically at pages 38-39 when asked, ‘What is a proxy for a transaction term?’ Low-to-moderate-income consumer: Compensation based on whether a consumer is of low-to-moderate income likely would not be a proxy for loan terms even if the loans to such consumers have terms that consistently differ from the loans of other consumers (for example, they have a higher interest rate). This is because loan originators typically cannot change whether a consumer is of low-to-moderate-income. What are the opinions out there (if any) on this aspect of the fact many bond programs are directed at LTMI borrowers?  Does this really matter?  We’re of the opinion you must pay an MLO the same on a bond loan as any other non-bond loan originated so perhaps it’s moot.”

And Tammy Butler from Optimal Blue contributes, “Regarding the issue of State Bond Programs and LO Compensation, I believe there are two issues. The first is the payment of LO Comp on a program, where the compensation to the company results in a net loss to the company. And the second is the use of these programs in an organization to demonstrate Fair Lending and diverse lending.

“If a lender chooses the path of ‘no state bond programs because we lose money’ due to LO Comp laws, then they shoot themselves in the other foot when it comes to demonstrating diversity in lending. This is a relatively new concept to mortgage bankers, although banks have been used to it for many years.

“Many of our clients contacted me on this issue, and as the attorneys have stated there appears to be little that a lender can do. To solve this conundrum I spoke with those who have offered these programs successfully for years, and asked them how they structure the LO compensation for bond programs. Comments were universally the same. If the institution decides that bond programs, or other similar grant programs are important to their business model in terms of diversity and profitability, then these loans are originated by an in-house originator, who is paid a decent base income and a lower compensation than traditional outside originators. Needless to say, any loan the in-house person originates is the same compensation. Logically, since these programs can be so different from a standard loan, it makes sense that you would have one highly trained originator that focuses only on these types of products. The final analysis would be the profitability on the ‘in-house’ model. If the answer to that is still ‘no’, then one would want to formulate a strong business justification backed by empirical data.”

Tammy’s note finished with, “This is the same type of thinking the CFPB will use when evaluating your diversity. If you are not doing those programs and it is affecting your diversity, and other lenders are able to be profitable and offer those programs, is there a reasonable solution that would accomplish the same result? By thinking through this and building a justification, if needed, you are demonstrating strong compliance management.”

It is important for all men to remember that, as women grow older, it becomes harder for them to maintain the same quality of housekeeping as when they were younger.   When this becomes apparent, try not to yell at them. Some are over sensitive, and there’s nothing worse than an over sensitive woman.

My name is Matt.  Let me relate how I handled this situation with my wife, Susan. When I retired a few years ago, it became necessary for Susan to get a full-time job, along with her part-time job, both for extra income and for the health benefits that we needed. Shortly after she started working, I noticed she was beginning to show her age. I usually get home from the golf club about the same time she gets home from work.

Although she knows how hungry I am, she almost always says she has to rest for half an hour or so before she starts dinner. I don’t yell at her. Instead, I tell Susan to take her time and just wake me when she gets dinner on the table.

I generally have lunch in The Grill at the golf club, so eating out is not an option for us in the evening.  I’m ready for some home-cooked food when I walk through that door. She used to do the dishes as soon as we finished eating but now it’s not unusual for them to sit on the table for several hours after dinner.

I do what I can by diplomatically reminding her several times each evening that they won’t clean themselves. I know she really appreciates this, as it does seem to motivate her to get them done before Susan goes to bed.

Another symptom of aging is complaining, I think for example, she will say that it is difficult for her to find time to pay the monthly bills during her lunch hour, but guys, we take them for better or worse, so I just smile and offer encouragement. I tell her to stretch it out over two, or even three days. That way, she won’t have to rush so much.  I also remind her that missing lunch completely now and then would help her figure. I like to think tact is one of my strong points.

When doing simple jobs, she seems to think she needs more rest periods. She had to take a break when she was only half-finished mowing the lawn. I tried not to make a scene. I’m a fair man. I told her to fix herself a nice big cold glass of freshly squeezed orange juice, then just relax for a while. And, as long as she is making one for herself, she might as well make one for me too.

I know that I probably look like a saint in the way I support Susan. I’m not saying that showing this much patience and consideration is easy. Many men would find it difficult if not impossible. Nobody knows better than I do how frustrating women get as they get older.

However, amigos, even if you just use a little more tact and less criticism of your aging wife as a result of reading this article, I will consider that writing it was well worthwhile.  After all, we are put on this earth to help each other.

(Editor’s note: Matt died suddenly of a perforated rectum after publishing this letter. The police report says he was found with a Calloway extra-long 50-inch Big Bertha Driver II golf club jammed up his rear end, with barely 5 inches of grip showing. A sledge hammer was laying nearby. His wife, Susan, was arrested and charged with murder. The jury took only 9 minutes to find her “Not Guilty”, accepting her defense that Matt, somehow without looking, accidentally sat down on his golf club.

Rob

(Copyright 2015 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.)