Jan. 9: Notes on borrower education & staff training, the pot business; can brokers comply with LE regulations?

The industry and vendors spend plenty of time educating LOs and lender personnel. What about educating & setting borrower expectations? Kerrie Chambers sent, “I recently heard a juvenile superior court judge speak about the state of juvenile crime in our community and a thought has lingered with me. He shared that the problem with the gang prevention task force is that the programs don’t start until kids are in high school, but by this time it is too late, prevention needs to start in elementary school. He shared several recent cases he had presided over and kids had been recruited for gangs in elementary school and many had their cases first opened in the juvenile courts before they were 10 years old.


“So I bet you are wondering what does this have to do with mortgage. After hearing the judge speak I had an appointment with a 40 year old woman who had never been a homeowner. I began with asking her what payment she could afford or would be comfortable for her. She looked blankly at me. I then asked what she was currently paying in rent: that was “complicated”. I continued to ask her what her gross income was verses her net and if she knew what her current disposable income was (net income – obligations).


“I could see she was starting to feel uncomfortable & frustrated, so I recommended we start out by reviewing her documents, paystubs, bank statements, etc. and do a budget & spending plan. A reality set in that buying a home is a ‘process’ and not like other consumer goods where you go in pay and leave. There is planning, commitment, sacrifice, confidence, knowledge, guidance, etc. I have read many articles on line about ‘5 steps to homeownership’ that really seem to start once someone is fully employed and it became so evident to me that recruiting homeowners really begins in elementary school and with financial parenting but the time people are fully employed they are often in a great deal of debt that impacts their ability to purchase a home. The choices our kids make at young ages, accountability and accounting as well as the sacrifices they make for savings prepare them for homeownership.


“I can remember Nancy Regan and her campaign ‘Say No to Drugs’ and now ‘Say No to bullying/gangs.’ But as mortgage professionals we can give people something to say yes to: ‘Say YES to successful homeownership’ and the choices and preparation that move us in that direction beginning at an early age. It seems like in the past that the mortgage industry has been inventive with creative solutions to increase homeownership that have not always benefited consumers or bankers in the end. Our company increased processing fees by $100 per loan this year due to the increasing cost of compliance and we have all seen with the AMCs that appraisals are double the cost they were previous to the AMCs. In the end consumers are paying higher costs for their ‘protection,’ but perhaps the aspect that protects consumers the most is education and it seems we have made very few strides in this regard.” Thank you Kerrie!


Speaking of education & training, and regarding the junction of TRID and preparing one’s staff for changes, Ralph LoVuolo Sr., mortgage industry coach, sent, “Rob, as I have pointed out during the last 55 years in the mortgage industry, the issues are not the laws, rules, or regulations that are imposed by the government. The issue as is true every single time is that the company that is experiencing an issue or challenge with said law and its extensions, is proper training. Training is always the issue. It is even true of the MLO who is not doing their job with proper attention to detail and has to wait for their check. This issue is easily solved by proper training of their sales initiatives so that the MLO has a pipeline of multiple deals and is not dependent on any “one” closing to pay their bills. To sum it up, when people are properly trained and thence work together as a team, with the client being their first priority, the system works, even with the over-reach of any government agency.”




Many people believe that the use of weed is heading toward that of alcohol, and eventually be as common place. Until then lenders and banks must grapple with state versus Federal law. Steve Brown, President of PCBB, writes, “Some 20 states now allow usage of marijuana for medical purposes. In addition, CO and WA have gone further and legalized recreational use at the state level. Bankers care about this because business is booming in these states and fees can be had due to so much cash movement around these businesses. Given an inability to collect fees on just about everything else, this is seen as an opportunity so some banks are exploring whether they can do business with such entities and collect fees to do so. To clear the air for bankers, no matter what state you operate in you are still subject to federal laws because your deposits are federally insured. At the federal level, possession and use of marijuana is still illegal—period. That means you could lose your bank charter if you bank marijuana-related businesses no matter your state of domicile. It also means your management team and directors could be fined or even go to jail because doing so breaks federal laws—period. Until the laws change at both the state and federal level, bankers should note that doing business with marijuana-related businesses is periculo tuo ingredere in Latin or ‘at your own risk.’”


Terry Ward with DataVerify wrote regarding the emerging marijuana business and related issues. “My company, DataVerify, offers alerts when a borrower’s SIC code shows employment in the medical marijuana ‘industry.’ Many of our customers are using this to spot loans with potential issues. The world is changing!”


And Jason contributed, “I read your bit about income derived from pot related business. It seems odd to me that an employee that works for a dispensary, who is pay is taxed both federally and by the state (I am in Michigan where we pay state income taxes), could have a problem using that income to qualify to buy a house. If the income is not good enough for qualification purposes, then wouldn’t it be fair for the employee to say, ‘Then don’t take my tax dollars?’ Interesting concept!”


John Jacobs notes, “Rob, have you ever noticed that supposed mortgage banking writers sometimes talk of the breakdown of retail, broker (wholesale), and correspondent production volumes, but obviously don’t understand the role of each channel of production? I recently had a bit of a back-and-forth with a writer for an industry publication that noted that correspondent production picked up but that broker and retail production were lower. I sent him a note and suggested that correspondent is not an independent origination channel. Their loan production is either a broker loan sold to the correspondent by a wholesale lender or a loan purchased from a retail originator. The maximum volume a correspondent lender could produce is the sum of the wholesale production and the retail production. Their volume cannot go up while wholesale and retail volume shrinks. If you total all three channels of production you will be double counting all production by the amount of correspondent volume. Correspondent lenders don’t actually produce a loan; they buy one that has already been made by another lender. There is only 1 loan.


“I remember a conversation I had at dinner one night many years ago with the then head of Fannie Mae. During dinner he mentioned that Countrywide was the largest retail loan originator in the country, to which I suggested that Wells Fargo was because of the large retail network they had, whereas CW was roughly split equally between retail, wholesale, and correspondent. The Fannie Mae executive said “No, CW has total production higher than WF”. I mentioned that the company that takes the loan application is the originator, not the company that “buys” the loan. He said I was mistaken, so I asked him why then we needed a “Third-Party Addendum” to our loan sale agreement with Fannie Mae to be able to do wholesale and correspondent lending with Fannie Mae, to which the conversation got changed.” Thank you John.


The impact of changes wrought upon the industry from “Know Before You Owe” continues. Ellie Mae indicates it took an average of 49 days to close a single family residential mortgage loan in Nov. vs. 46 days in Oct. This is the longest time to close since Feb. 2013 and is reportedly the result of lenders adapting to new CFPB rules designed to make mortgage terms easier to understand for borrowers.


I received this note. “It is my contention that it is virtually impossible for any broker to comply with the timelines for delivery of the initial Loan Estimate in any purchase situation. We often receive the 6 pieces of information which trigger the 3-day LE requirement on the same day we get a new purchase client.  However, the contract may still be under negotiation (called the “attorney review period” in some states) or the client may not wish to apply for the mortgage prior to the home inspection.  In either event, we are required to provide a LE within 3 days of obtaining the triggering information. If we don’t supply the LE within 3 days, we are in violation of TRID; if we do supply the LE, this puts us at odds with virtually all of our lender-partners who insist on preparing the LE themselves and prohibit us from registering a loan for which we have issued our own LE. I suspect that many brokers simply do not issue any LE prior to registering with a wholesale lender but that could theoretically be a dangerous game.”


“With the lack of CFPB security controls and clear violation of Dodd Frank section 1022, then coupled by the power they wield, is an extremely scary situation. As a member of the MBA, a concerned consumer and a taxpayer, what can all of us start doing to bring this to the attention of the rest of the country?  The average person has no idea that all of this is going on in our industry (supposedly to protect then).  Seriously, this is starting to feel like an episode from Tony Soprano. ‘Extortion’ is a good term I’ve heard used and I have to agree! Our grandchildren will be learning in their economics classes about how the CFPB went too far and brought mortgage lending to its knees… Or even worse…”


[Editor’s note: it helps if you join Mortgage Action Alliance (MAA) to make your complaints better heard. Heck – with no dues, why not?]



(If you take offense at blonde jokes, this is pretty much the opposite.)

A blonde woman walks into a bank in NYC before going on vacation and asks for a $5,000 loan.

The banker asks, “Okay, miss, is there anything you would like to use as collateral?”

The woman says, “Yes, of course. I’ll use my Rolls Royce.”

The banker, stunned, asks, “A $250,000 Rolls Royce? Really?”

The woman is completely positive. She hands over the keys, as the bankers and loan officers laugh at her. They check her credentials; make sure she is the title owner. Everything checks out. They park it in their underground garage for two weeks.

When she comes back, she pays off the $5,000 loan as well as the $15.41 interest.

The loan officer says, “Miss, we are very appreciative of your business with us, but I have one question. We looked you up and found out that you are a multi-millionaire. Why would you want to borrow $5,000?”

The woman replies, “Where else in New York City can I park my car for two weeks for only $15.41 and expect it to be there when I return?”





(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.)



Rob Chrisman