July 29: Proposed banking changes & borrower prices; vendor news; interesting tale about teaching; Saturday Spotlight: Change Wholesale

Plenty of lenders and real estate agents like numbers, so here are some to chew on during a summer weekend. Looking to buy a home, but you lean left politically? Tough luck, as the “2023’s Best & Worst Cities for First-Time Home Buyers Report” from WalletHub revealed that the top-five best places to move are all in Florida. Nine of the “worst” ten are in California, with only Anchorage, Alaska breaking that monopoly. Politics aside, Springfield, Illinois, has the most affordable housing (median house price divided by median annual household income),17.5 times cheaper than in Santa Barbara, California, the city with the least affordable housing. Honolulu has the lowest real-estate tax rate, 0.30 percent, which is 12 times lower than in Waterbury, Connecticut, the city with the highest at 3.59 percent. Flint, Michigan, has the highest rent-to-price ratio, 26.64 percent, which is 16 times higher than in Santa Monica, California, the city with the lowest at 1.66 percent. And Baton Rouge, Louisiana, has the lowest total home-energy cost per month, $100.84, which is 3.6 times lower than in Bakersfield, California, the city with the highest at $360.76.

Saturday Spotlight: Change Wholesale


“Financing America’s diverse homeowners, fairly and responsibly”

You have a mission to serve the underbanked and underserved populations in the U.S. How big of a segment of potential creditworthy borrowers is this? What is the market opportunity for Change?

Currently, there are 15,954 loan broker businesses in the U.S., a 6.4% increase over 2022. Meanwhile, mortgage broker share has also trended upward, from about 20% in 2020 to about 22% today*.

We believe brokers have a built-in market edge today with their unique ability and capacity to shop a variety of lenders to obtain the best products and pricing for their borrowers. Who are today’s borrowers? They’re not just salaried W-2 employees whose loan profiles easily fit agency norms. They are gig workers, including small-business owners and private contractors from every field whose employment and income may fluctuate monthly. Today, there are 73.3 million freelancers in the U.S., up from 70.4 million only a year ago**.

These borrower ranks also comprise underbanked and underserved communities, including many Black, Hispanic, and low-to-moderate income Americans, who despite their prime, creditworthy status, have largely been excluded by traditional lending guidelines. At Change, in lockstep with our broker partners, we have been working to expand homeownership for all Americans.

We’re succeeding with superior loan products that feature common-sense underwriting standards, like our Alt-Doc loan, which can close using just the first page of the bank statement, and our groundbreaking Community Mortgage, the only owner-occupied mortgage that doesn’t require the borrower to verify income or employment.

As proof that our model is thriving, our seventh and most recent securitization helped Change receive its first AAA rating. For investors, this confirms these are high-quality, non-QM loans, and for brokers looking to grow their business, it tells them that they can access a robust wholesale channel to get more of their prime but previously underserved borrowers approved.


How does Change expand the dream of homeownership for millions of Americans as a potential solution to address the wealth gap in the U.S.? 

The reason our collaboration with brokers is so vital is that homeownership is a proven pathway for building wealth. Since 1991, home appreciation has averaged 4.3%, according to the FHFA. Even at 4% yearly appreciation, that would mean the value of homes doubles in roughly 18 years. According to longtime National Association of Realtors economist Lawrence Yun, homeowners build a net worth about 40 times higher than renters.

Non-homeowners, of course, are missing out on this tremendous growth. To make homeownership a reality for more Americans, and, in effect, close the wealth gap, we’re working with our broker partners to make home financing more accessible and affordable.


How are you making this happen? How do you and your wholesale partners sustain your market momentum? 

Of the top 10 mortgage lenders today, only three are banks, a void that wholesaler lenders like Change and independent mortgage brokers and bankers have strategically and successfully filled.

Together, we’re responding to the fact that borrowers want more choices and options, especially in a higher-interest rate environment. With brokers’ unique matchmaking abilities to align their borrowers with innovative products like our Community Mortgage, we’re creating more homeownership opportunities for all Americans.

By investing in and backing our products and brokers with leading-edge technology, data-driven marketing support, unrivaled training, and best-in-class AEs, we see even more growth ahead for the wholesale channel.

At the end of the day, our resources, resolve and commitment to help our broker partners serve a wider range of clients is why Change Wholesale is the nation’s No. 1 non-QM lender***.

*Source: ibisworld.com and Housingwire.com  

**Source: explodingtopics.com  

***See Scotsman Guide, 2023 Top Non-QM Lenders by Scotsman Guide. 

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

Banks and their policies back in the news with capital requirements


Regulators have issued sweeping proposals for capital requirements on banks with over $100 billion in assets in accordance with the global Basel III endgame standards, drawing warnings from multiple groups. “These increases will have a tangible effect on banking activities and may have a detrimental impact on US market liquidity and lending,” Federal Reserve Governor Michelle Bowman says. SIFMA President and CEO Kenneth E. Bentsen, Jr. says, “Imposing dramatic increases in capital on the trading book will likely result in increased costs and/or reduced capital and credit to end users of our markets. The regulators have failed to provide justification for such action.”

The proposal generally raises capital requirements in a manner expected to deter investment in mortgage servicing rights, not a good thing in terms of pricing. The Mortgage Bankers Association opposes the proposed rulemaking implementing the “Basel III Endgame,” and making changes to capital requirements for banks, writing a letter to banking agencies.

“The MBA strongly urges you to vote against the proposed interagency Notice of Proposed

Rulemaking implementing the Basel III ‘endgame’ rule, expected to impose a 15 to 20 percent increase in capital requirements for larger institutions.

“Such a substantial hike will have both macroeconomic and sector impacts that could stunt economic growth and fundamentally shift what business lines mid-sized and regional banks will focus on. Capital rules of this magnitude should be accompanied by a quantitative impact study to assess both the macroeconomic and sector impacts, as has been done with previous Basel-related reforms.

“We are particularly concerned about press reports of a sharp increase in risk weights for single-family mortgages, 20 percentage points above the levels in the Basel Committee framework. Higher capital in general, and sharply higher risk-weightings on single-family mortgages, could exacerbate already-challenging conditions facing the housing market.

“Importantly, we are also concerned about the combined effect of the banking regulatory framework for housing and rental housing supply. Specifically, the proposed Community Reinvestment Act overhaul combined with the proposed capital standards will restrict the creation of new affordable housing units, in contrast to the Administration’s stated priorities.

“Given ongoing housing affordability and supply challenges, the banking agencies must conduct the analysis needed to avoid precipitating a withdrawal of support for real estate finance markets from the largest providers of capital in the country. While it has been suggested that a phased implementation will minimize the impact, we know from prior experience that investors and markets will react immediately to such significant capital changes, and banks will be forced to respond to that pressure in real time. The economic impact cannot be mitigated by phased implementation alone.”

But Ed Groshans with Compass Point Research and Trading wrote, “All but 5 banks subject to Basel III Endgame (B3EG) proposed capital requirements (NPRM) are currently in compliance according to Federal Deposit Insurance Corporation (FDIC) Chair Marty Gruenberg’s statement.

“This does not mean B3EG is immaterial. B3EG is expected to raise Common Equity Tier 1 (CET1) minimums by 16% for all bank holding companies (BHCs) and 9% for all banks. CET1 minimums for Category I and II BHCs are expected to increase by 19%, whereas Category III and IV BHCs are expected to experience an increase of 6% in CET1 requirements according to the Federal Reserve (Fed) Board memo.

“In addition, the Federal Reserve (Fed) Vice Chair (VC) for Supervision Michael Barr stated ‘banks would be able to build the requisite capital through retained earnings in less than two years, even while maintaining their current dividends.’ Gruenberg stated the capital shortfall is estimated to be less than 1 year of earnings.

“Our primary takeaway from the FDIC’s and Fed’s B3EG NPRM discussion is that most banks’ capital distribution plans will not be affected. The 5 banks with estimated capital shortfalls may be able to achieve B3EG compliance by December 31, 2028, without adjusting capital plans, but there is a risk that buyback activity may have to be adjusted to achieve compliance. This risk is mitigated by the just under three and a half years window before the rule is expected to be in full effect. Neither the FDIC nor Fed stated the banks that are not in compliance; however, it is clear the market risk requirement is one of the more material changes. This indicates that large banks with significant trading operations are at risk of not meeting the proposed requirements.”

Vendors/third-party providers touch all facets of lending


Let’s take a quick random look at who’s doing what, since these suppliers do much more than capitalize letters in the middle of their names.

ComplianceEase’s TRID Monitor is now integrated with the Mortgage Cadence Platform (MCP) the cloud-based digital lending platform from Mortgage Cadence. The integration helps mortgage lenders monitor loans for TRID errors and correct them before they cause costly delays. ComplianceEase an industry-leading automated mortgage compliance system from SitusAMC, ensures TRID compliance by monitoring and auditing loan terms at each point in the lifecycle, including Loan Estimate (LE) and Closing Disclosure (CD) timing, sequencing, and tolerance testing, changed circumstances and reasons for redisclosures, and post-consummation cure analysis. ComplianceEase can be seamlessly integrated into loan origination systems and other workflows, with one-click data delivery of audit results to investors and regulators.

Sagent, a Warburg Pincus-backed fintech software company modernizing mortgage servicing for banks and lenders, announced a seven-year partnership extension with American Savings Bank (”ASB”) to continue powering its mortgage servicing ecosystem. American Savings Bank will continue powering its scale servicing operations with Sagent’s cloud based LoanServ system of record. Sagent’s cloud-native, open-API mortgage servicing platforms are the industry’s only scale systems all synchronized by real-time data.

Continually rising interest rates and an aging housing market are signaling a growing remodeling market. Plunk, the first AI-powered, real-time analytics platform for residential real estate, and Milestones.ai, a next generation platform dedicated to homeowner management, have partnered to provide AI-driven remodel advice to homeowners. Milestones has integrated Plunk Remodel Value and Project Recommendations into their Homeowner Management System. Plunk Remodel Value determines the expected value of a home after a full-scale renovation. Project Recommendations categorize renovation projects according to the estimated value they can add to a particular home.

Clear Capital, a national real estate valuation technology company, announced an expanded partnership with ValueLink, a leading valuation management platform, to support appraisal modernization policy changes. ValueLink customers now have access to Clear Capital’s proprietary Universal Data Collection (UDC™), which ensures fast and accurate collection and submission that meets Freddie Mac and Fannie Mae data standards for property data reports and property data collections respectively. “Clear Capital’s UDC provides flexibility, as eligible loans can be quickly and easily transferred to the agency with the loan program that meets the borrower’s needs, without the need for an additional product.”

National MI has integrated with Vesta, a loan origination system (LOS) provider and software-as-a-service company. “The integration enables lenders to obtain price quotes and order National MI’s real-time, risk-based mortgage insurance through its Rate GPS® tool instantly without having to leave the Vesta LOS platform. National MI’s state-of-the-art API platform enables lenders and loan origination system (LOS) providers to quickly and seamlessly retrieve accurate mortgage insurance quotes through Rate GPS. Using open, cloud-based APIs, Vesta’s LOS empowers lenders of all sizes to build customizable workflows and rules around their mortgage processes without using developer resources.” Read more in the Press Release.

In keeping with its mission to promote transparency and aid in model governance, VantageScore released the results of its annual model performance assessment. Highlights of VantageScore’s model performance assessment is available for download.

An old man meets a young man who asks, “Do you remember me?”

And the old man replied no.

Then the young man tells him he was his student, and the teacher asks, “What do you do, what do you do in life?”

The young man answers, “Well, I became a teacher.”

“Ah, how good, like me?” asks the old man.

“Well, yes. In fact, I became a teacher because you inspired me to be like you.”

The old man, curious, asks the young man at what time he decided to become a teacher.

And the young man tells him the following story.

“One day, a friend of mine, also a student, came in with a nice new watch, and I decided I wanted it. I stole it, I took it out of his pocket. Shortly after, my friend noticed his watch was missing and immediately complained to our teacher, who was you. Then you addressed the class saying, ‘This student’s watch was stolen during classes today. Whoever stole it, please return it.’

“I didn’t give it back because I didn’t want to.

“You closed the door and told us all to stand up and form a circle. You were going to search our pockets one by one until the watch was found. But you told us to close our eyes, because you would only look for his watch if we all had our eyes closed.

“We did as instructed.

“You went from pocket to pocket, and when you went through my pocket, you found the watch and took it. You kept searching everyone’s pockets, and when you were done you said ‘open your eyes. We have the watch.’

“You didn’t tell on me, and you never mentioned the episode. You never said who stole the watch either. That day you saved my dignity forever. It was the most shameful day of my life.

“But this is also the day I decided not to become a thief or a bad person. You never said anything, nor did you even scold me or take me aside to give me a moral lesson. I received your message clearly.

“Thanks to you, I understood what a real educator needs to do.

“Do you remember this episode, professor?”

The old professor answered, “Yes, I remember the situation with the stolen watch, which I was looking for in everyone’s pocket. I didn’t remember you because I also closed my eyes while looking.”

This is the essence of teaching:

If to correct you must humiliate, you don’t know how to teach.

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, “Interest Rates are Like the Weather? Or Like Signs of the Zodiac?” The Commentary’s podcast is live and at any place you obtain your podcasts (like Apple or Spotify).


(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