Feb. 17: Thirteen credit reporting errors; restaurant biz on fire; owner occupied housing valued at $37 trillion; Saturday Spotlight: Docutech

“Well, I got some beer and the highway’s free. And I got you, and baby, you’ve got me…” So sang Bruce Springsteen. For something non-directly-mortgage related, but certainly directly related to towns and cities and highways and settlement and transporting goods in the United States in the last 50+ years, you can spend 3-4 minutes on a fun, short read about how the U.S. Interstate Highway System began. (I know, it sounds boring, but if you’ve ever driven on a highway, or like history, the tale of the 1919 military convoy with the perils of Illinois, Utah, and Nebraska, and Dwight Eisenhower in the convoy is worth it. Speaking of transporting goods, with diversification efforts and growing trade tensions, Mexico overtook China to be the top source of goods imported by the U.S. in 2023 for the first time in more than two decades. (More below, since this impacts our economy, and therefore your clients.)

Saturday Spotlight: Docutech®

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“Accelerate Closings. Accelerate the Dream.”

 

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).

 

Docutech History: Docutech, a member of the First American family of companies, provides an end-to-end, integrated, digital mortgage experience, from document generation to eDelivery, eClose and print fulfillment. Docutech sets the standard in providing market-proven technology and unrivaled customer service to the financial industry. Founded in 1991 and acquired by First American in 2020, Docutech has become a technology powerhouse, combining its innovative technology and expertise with the broad solution set and financial strength of First American.

 

Last year Docutech expanded the functionality of its digital mortgage closing platform, Solex®, to include in-person electronic notarization (IPEN), a premier lender dashboard, and an enhanced closing room.

 

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

 

Docutech’s client-centric approach involves supporting the charities that our clients care deeply about. Inspired by efforts across First American, we also support our employees as they give back to the communities where we live and work. Our employees contribute their passion, time and money to dozens of food banks, charity walks, children’s causes, animal rescues and more every year.

 

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?

 

Docutech employees are deeply engrained in the mortgage and financial technology industry and play significant roles in numerous industry memberships and associations, including The Mortgage Collaborative, American Credit Union Mortgage Association, MISMO, Mortgage Bankers Association, to name just a few.

 

There are also numerous learning and development opportunities internally, including First American’s Women in Leadership, SPARK, and our Emerging Leaders programs. The Women in Leadership and SPARK programs are designed to develop talented women who, through their influence, have a significant impact on our company’s operations and overall success. The Emerging Leader is a hallmark leadership development program within First American, focusing on enhancing the skills of leaders from divisions and regions across the company. These programs have contributed to First American’s recognition as one of the 100 Best Companies to Work For by Great Place to Work® and Fortune Magazine for the eighth consecutive year.

 

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.

 

One of Docutech’s core values is enjoyment, which we define as loving what you do and who you work with, and we’re consistently finding new ways to bring this core value to life for both our employees in the office and those working remote. For example, on every other Friday, Docutech has a tradition where a member of the leadership team shares a triumph, challenge, learning, or another personal story, with the entire Docutech team. We then open up the conversation in a Teams channel for every employee to contribute their thoughts and stories, with the opportunity to win prizes.

 

Docutech also has a Watercooler Teams channel (for fun, throughout-the-day banter), and a “camera on” (as much as possible) approach to our virtual meetings. Beyond that, we make it a practice to hire smart, engaging people who help make our days both productive and fun.

 

Docutech also hosts several culture-enhancing events each year that bring employees together either virtually or in-person. In October, we are holding a Halloween decorating contest where teams decorate a workspace incorporating mystery items that will be sent to them.

 

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

 

We’re proud to play a leadership role in the eClosing adoption journey and broader digital transformation taking place across both the real estate and mortgage lending industries. Our industry leadership contributed to First American being named to the Fast Company 2023 Best Workplaces for Innovators list, which honors organizations and businesses that demonstrate an inspiring commitment to encourage and develop innovation at all levels. We’re driven to simplify the complex needs for our customers and enhance the experience of the consumers they serve through innovative technologies and solutions.

 

Docutech‘s strong culture is rooted in a set of core values: Velocity, Ownership, Innovation, Customer Success, and Enjoyment (VOICE). Our unique culture continues to propel Docutech to consistently provide the best-in-class products and services our customers expect from us.

 

Fun fact about your company.

 

Emily Shapiro, president, is as driven in her personal life as she is in her professional life. In her free time, Emily races off-road, both cars and trucks. She’s sponsored by Impact by MCS and has won multiple championships, earned Rookie of the Year honors, and is a two-time winner of the Driver of the Year award in her series.

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

Demographics helping lenders and vendors

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The total value of owner-occupied housing units in the nation’s 50 largest metros is $23.5 trillion, making up the bulk of the value across the country! LendingTree analyzed the total value of owner-occupied housing units in each of the 50 largest U.S. metropolitan areas, finding that this figure grew by about 38 percent between 2019 and 2022, from $17.02 trillion. The total value of all owner-occupied homes in the U.S. is $36.60 trillion.

Based on the total value of owner-occupied homes within them, New York, Los Angeles, and San Francisco are the most valuable metros in the U.S. The total value of homes in the New York metro is $2.75 trillion, while the total values in Los Angeles and San Francisco are $2.31 trillion and $1.39 trillion, respectively. Overall, real estate is less valuable in Memphis, Tenn., Birmingham, Ala., and Buffalo, N.Y., and Oklahoma City. These are the only metros where homeowners are sitting on less than $100 billion in aggregate real estate value.

Loan officers and real estate agents are keenly aware of couples splitting up. Since 1990, the divorce rate for those over the age of 55 has doubled, and that is only the start of the story. For those age 65 and above, the number is even higher, with three times as many couples splitting up over the same timeframe.

A HECM loan form of reverse mortgage is one way to have a little more flexibility during and after a “gray divorce.” During a gray divorce, a reverse mortgage is a common option to refinance the house under one individual’s name. This can provide them with a little more financial freedom after ending their marriage, while permitting them to still remain in their home. Reverse mortgages can also be a helpful tool in funding a settlement agreement or be used as part of a buyout.

The economy’s impact on potential borrowers and rates

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If you’re looking for a recession, don’t look at the continued tight labor market, the value of housing, or… at U.S. restaurants where sales are projected to rise from an estimated $997 billion in 2023 all the way up to $1.1 trillion in 2024. That means that the restaurant industry in the United States will be bringing in $3 billion every day, or $125 million per hour. That doesn’t necessarily mean that restaurants are going to be making a ton of profit since expenses are rising (think food costs, labor, rent, permits…) which will eat into margins in the notoriously tight-margined space. But nevertheless, it’s expected that the industry will continue to grow for the foreseeable future.

Real estate stays put, unlike vehicles. Auto manufacturers, including Tesla and others, have been feeling some serious heat from China’s top electric vehicle makers especially Berkshire Hathaway-backed BYD (OTCPK:BYDDY), which has been completely obliterating rivals on price and even topped Tesla in sales last year.

While subsidies have played a part in its path to success, the new EV industry leader also owns the entire supply chain for its batteries and benefits from cheaper manufacturing costs in China. “If there are no trade barriers established,” CEO Elon Musk said on a post-earnings call last month, “they will pretty much demolish most other car companies in the world. They’re extremely good.”

“So what?” you ask? Well, if a Chinese company makes a car in Mexico, what about the tariff? U.S. consumers pay for tariffs (don’t let politicians confuse you) and high tariffs on China imposed during the Trump administration have helped keep BYD out of the U.S. But the company is eyeing a plant in Mexico that American carmakers fear can be used to make inroads under the USMCA trade agreement. A Ford official observed, “Last year, 25 percent of all vehicles sold in Mexico were sourced in China. The world is changing.” Ford recently pulled back on EV investment after losing $4.7 billion on its battery-powered car unit in 2023, and it may lead it to adopt more of a plug-in hybrid strategy or diversified approach long-advocated by the likes of Toyota.

The credit world: are we having fun yet?

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This week in Boise I heard a presentation from Barkley Smith about credit problems. He listed the “Top 13 Credit Reporting Errors” from his perspective. They’re worth a gander.

The first is a credit report listing the debt belonging to the consumer’s relative or a stranger with the same name. “Credit reporting agencies do mix people up and apply accounts not belonging to a consumer to their report. #2 is an account being reported which does not belong to the consumer whatsoever. #3 is where the consumer paid the balance of the account in full, but the credit report still shows the consumer owes the creditor. #4 was where the consumer negotiated a settlement for less than the full balance and paid, but the credit report still shows the consumer owing the creditor. (The account should be shown as paid in full.)

#5 is where the account is too old to be included in the credit report. In general, a delinquent account over seven years old should be removed from a credit report. A bankruptcy should only be listed for 10 years in the public records section. #6 on the credit problem list is where the creditor issued a 1099C to the consumer, but it is still showing the money is due from the consumer. (The full balance was forgiven/discharged but the creditor is still reporting the full balance.) #7: the account was sold to a debt buyer or different entity but is still reporting as owed to the original creditor (instead of being listed as transferred.)

#8 is where the creditor is reporting the same account for a consumer twice. #9 is a short sale listed as a foreclosure instead of a short sale. #10: consumer had account discharged in a bankruptcy but is still reporting as owed. (All debts discharged in a bankruptcy should show a zero balance post-bankruptcy.) #11 Consumer is an “authorized user” on another consumer’s credit card, but the report shows the balance for all users, not just the authorized user’s balance. (Often times credit card companies report the total balance for all users, not just the “authorized user.”)

Home stretch! #12 credit reporting error is when the debt buyer re-ages the last payment date on the report to the date they purchased the account. This will affect when the debt can no longer be reported. Lucky #13 is when the date of foreclosure is listed over 30 days past the actual foreclosure date: The date of foreclosure must be listed within 30 days of the actual foreclosure, any later and that is a violation.

Barkley recommended that a loan originator should not help fix credit issues, as they are not licensed to do that. He mentioned SCRA dispute letters.

In terms of the cost of pulling credit, and the pros and cons of soft versus hard and trigger leads. loan officers are doing what they can to educate clients, including posting videos alerting their clients.

Lenders who have not moved to having the borrower pay upfront for running their credit report, and even those who have, are incensed by the “cost of credit.” The Community Home Lenders of America (CHLA) sent a letter to the three Credit Bureaus (Equifax, Experian, and Transunion) requesting the restoration of pricing discounts for soft credit pulls.

“Soft credit pulls are a critical tool for underserved and first-time homebuyers as they allow independent mortgage banks to work with borrowers to improve their credit score and help them pre-qualify for a mortgage loan,” said Scott Olson, executive director of CHLA. “Pricing soft pulls at the same rate of hard pulls, combined with FICO’s 500 percent price increase, only makes the objective of homeownership harder, which is already exacerbated by a challenging market.”

Last month, CHLA released a White Paper entitled “Mortgage Credit Score Markets and Pricing – How to Ensure the Market Remains Fair to All Borrowers” which provides an overview of the credit scoring process and explains these quasi-monopolistic price increases by FICO in more detail.

“Soft credit pulls are a critical tool that our member mortgage loan originators use to work with underserved borrowers, particularly borrowers with credit blemishes, to improve their credit score and ultimately obtain a pre-qualification or an actual mortgage loan. This process is often essential to helping many families achieve their goal of becoming a first-time homebuyer.

“Unlike a hard credit pull, the mere action of a soft credit pull will not negatively affect a person’s credit score. Moreover, a soft inquiry does not activate trigger leads. Today, trigger leads inundate mortgage borrowers with dozens of unwanted texts, calls, and emails, which cast a poor light on the entire mortgage production industry.

“Unfortunately, at the end of last year, each of the credit resellers announced that they were ending the pricing discount that had been in place for soft credit pulls. The credit resellers advised lenders that the soft credit pull will effectively be priced the same as a hard credit pull based on equalization of pricing in 2024.

In notifications to lenders, the credit resellers said this policy change is due to significant price increases from Equifax, Experian, and TransUnion for this product and others. The credit resellers advised lenders that increased soft-pull demand was a factor in these price hikes.

Lenders view soft credit pulls as a major consumer benefit, using them to reduce initial file costs to keep mortgage costs down, for example, by taking advantage of Fannie Mae and Freddie Mac programs that offer the ability to obtain initial underwriting approvals with a single bureau report.

It is true that mortgage lenders generally do not charge consumers for the cost of credit reports, including the cost of these soft credit pulls, unless a loan is closed. However, since credit reports are an essential part of the mortgage loan process, whether for a pre-qualification stage or for an actual mortgage loan application, the simple reality is that these costs are inevitably passed along to mortgage borrowers in the form of higher mortgage fees.

Therefore, the elimination of the price discount for soft credit pulls will create more of a financial disincentive for mortgage lenders to work with borrowers that need help in improving their credit score (to obtain a pre-qualification or a mortgage loan). Ultimately, it could conceivably result in some lenders charging upfront for the cost of this service.” As noted above, here is the full letter.

Just when you think you have it figured out, you never know what’s around the corner, as demonstrated by a short video about this blind archer. (Skip the ad of course.)

Visit www.robchrisman.com 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. STRATMOR’s current blog is titled, “It’s 2024: Do You Know Where Your Servicing Is?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).

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Rob Chrisman